# CORPORATION OF CALCUTIA AND ANOTHER v. LIBERTY CINEMA

- **Citation:** [1965] 2 S.C.R. 477
- **Court:** Supreme Court of India
- **Decided:** 1964-12-14
- **Bench:** A. K. Sarkar, K. SuBBA RAo, Raghu.Bar Dayal, N. Rajagopala Ayyangar, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/corporation-of-calcutia-and-another-v-liberty-cinema-3424
- **Pages:** 70

## Headnote

Calcutta Municipal A.ct (33 of 1951), ,. 413 and 548-Licen.re fee
on cinema houses-whether tax or fee for rendering service-Validity of
levy and s. 548.
Under a. 413 of the Calcutta Municipal Act, 1951, no person shall
c
without a licence granted by the Corporation of Calcutta, keep open any
cinema house for public amusement in Calcutta.
Under s. 548(2), far
every licence under the Act, a fee may be charged at such rate as may
from time to time be fixed by the Corporation. In 1948, the appellant
(Corporation) fixed fees on the basis of annual valuation of the cinema
house.
The respondent, who was the owner and licencee of a cinema
theatre, had been paying a licence fee of Rs. 400 per year on that basil!.
In 1958, the appellant, by a Resolution, changed the basis of assessment
D
of the fee.
Under the new method the fee was to be assessed at ratee
prescribed per show according to the sanctioned seating capacity of the
cinema house; and the respondent had to pay a fee of Rs. 6,000 per year.
The respondent, therefore, moved the HiJ!h Court for the issue of a writ
quashing the resolution and the application was allowed.
In the appeal to the Supreme Court the appellant contended that :
(i) the levy was a tax and not a fee in return for services and (ii) •·
E
548 ( 2) does not suffer from the vice of excessive delegation; while the
respondent contended that
( i) the levy was a fee in return for services
to be rendered and not a tax, and as it was not commensurate with the
costs incurred by the Corporation in providing the services, the levy was
invalid; (ii) if s. 548 authorised the levy of a tax, as distinct from a fee in
return for service rendered, it was invalid, as it amounted to an illegal
delegation of legislative functions to the appellant to fix the amount of
a tax "without any guidance for the purpose and (iii) the levy was invalid
F
as violating Art. 19(1) (f) and (g) of the Constitute.
HELD (per Sarkar, Raghubar Dayal and Mudholkar JJ) : (i) The
levy was not a fee but a tax. (490 Fl
1k Act does not intend to use the word "fee" as referring only to
a levy in return for services, for, the levies authorised by some other sections of the Act are really "taxes", though called "fees". Besides, the
words used are "fee for the licence" and these words do not necessarily
G
mean a "fee in return for services" as is apparent from Arts.
110(2)
and 199(2) of the Constitution, where both expressions are used indicating that they are not the same. [483 G-H]
The word "fee" in s. 548 must be read as referring to a tax as any
other reading would make the section invalid, and in interpreting a statute,
it ought to be made valid if possible. [484 B-C]
The decisions of this Court establish that in order to make
H
a levy a fee for services rendered, the levy must confer special benefit on
the persons on whom it is imposed. The levy under s. 548(2) ill not a
"fee in return for services" as the Act does not provide for any services
of a special kind being rendered, resulting in benefits to the person on
478
SUPREME
COURT
Jll!PORTS
(1965] 2 S.C.R.
whom it is imposed. S. 527(43) permits by-laws to be framed for regulatA
ing the inspection, supervision and control,
amolli others, of cinema
houses; but it is not obligatory to make such by-laws and therefore, there
may be no services to render.
Even the by-law made provides only for
inspection, and the work of inspection done by the appellant was only
to see that the terms of the licence were observed by the licensee. It waa
not a service to him, and so, no question arises of correlating the amount
of levy to the coots of any service. The levy therefore is not a fee and
must be tax. (485 B.C, F; 488 E; 490 P,.F]
B
The Commissioner, Hindu Religious Endowments, Madras Y. Shrl
Lakshmindra Thirtha Swamiar of Sirur Mutt, (1954) S.C.R. 1005, H. H.
Sudhindra Thirtha SwarnJar v. Commissioner for Hindu Religious and
Charitable Endowments, (1963] Supp. 2 S.C.R.
302 and The
Hinglr
Rampur Coal Co. Ltd. v. The S

## Text

_Characters 0–39,978 of 187,241. This is a partial read: ask again with offset=39978 for what follows._

A
CORPORATION OF CALCUTIA AND ANOTHER
v.
LIBERTY CINEMA
December 14, 1964
477
B
[A. K. SARKAR, K. SuBBA RAo, RAGHU.BAR DAYAL, N. RAJAGOPALA AYYANGAR AND J. R. MUDHOLKAR, JJ.]
Calcutta Municipal A.ct (33 of 1951), ,. 413 and 548-Licen.re fee
on cinema houses-whether tax or fee for rendering service-Validity of
levy and s. 548.
Under a. 413 of the Calcutta Municipal Act, 1951, no person shall
c
without a licence granted by the Corporation of Calcutta, keep open any
cinema house for public amusement in Calcutta.
Under s. 548(2), far
every licence under the Act, a fee may be charged at such rate as may
from time to time be fixed by the Corporation. In 1948, the appellant
(Corporation) fixed fees on the basis of annual valuation of the cinema
house.
The respondent, who was the owner and licencee of a cinema
theatre, had been paying a licence fee of Rs. 400 per year on that basil!.
In 1958, the appellant, by a Resolution, changed the basis of assessment
D
of the fee.
Under the new method the fee was to be assessed at ratee
prescribed per show according to the sanctioned seating capacity of the
cinema house; and the respondent had to pay a fee of Rs. 6,000 per year.
The respondent, therefore, moved the HiJ!h Court for the issue of a writ
quashing the resolution and the application was allowed.
In the appeal to the Supreme Court the appellant contended that :
(i) the levy was a tax and not a fee in return for services and (ii) •·
E
548 ( 2) does not suffer from the vice of excessive delegation; while the
respondent contended that
( i) the levy was a fee in return for services
to be rendered and not a tax, and as it was not commensurate with the
costs incurred by the Corporation in providing the services, the levy was
invalid; (ii) if s. 548 authorised the levy of a tax, as distinct from a fee in
return for service rendered, it was invalid, as it amounted to an illegal
delegation of legislative functions to the appellant to fix the amount of
a tax "without any guidance for the purpose and (iii) the levy was invalid
F
as violating Art. 19(1) (f) and (g) of the Constitute.
HELD (per Sarkar, Raghubar Dayal and Mudholkar JJ) : (i) The
levy was not a fee but a tax. (490 Fl
1k Act does not intend to use the word "fee" as referring only to
a levy in return for services, for, the levies authorised by some other sections of the Act are really "taxes", though called "fees". Besides, the
words used are "fee for the licence" and these words do not necessarily
G
mean a "fee in return for services" as is apparent from Arts.
110(2)
and 199(2) of the Constitution, where both expressions are used indicating that they are not the same. [483 G-H]
The word "fee" in s. 548 must be read as referring to a tax as any
other reading would make the section invalid, and in interpreting a statute,
it ought to be made valid if possible. [484 B-C]
The decisions of this Court establish that in order to make
H
a levy a fee for services rendered, the levy must confer special benefit on
the persons on whom it is imposed. The levy under s. 548(2) ill not a
"fee in return for services" as the Act does not provide for any services
of a special kind being rendered, resulting in benefits to the person on
478
SUPREME
COURT
Jll!PORTS
(1965] 2 S.C.R.
whom it is imposed. S. 527(43) permits by-laws to be framed for regulatA
ing the inspection, supervision and control,
amolli others, of cinema
houses; but it is not obligatory to make such by-laws and therefore, there
may be no services to render.
Even the by-law made provides only for
inspection, and the work of inspection done by the appellant was only
to see that the terms of the licence were observed by the licensee. It waa
not a service to him, and so, no question arises of correlating the amount
of levy to the coots of any service. The levy therefore is not a fee and
must be tax. (485 B.C, F; 488 E; 490 P,.F]
B
The Commissioner, Hindu Religious Endowments, Madras Y. Shrl
Lakshmindra Thirtha Swamiar of Sirur Mutt, (1954) S.C.R. 1005, H. H.
Sudhindra Thirtha SwarnJar v. Commissioner for Hindu Religious and
Charitable Endowments, (1963] Supp. 2 S.C.R.
302 and The
Hinglr
Rampur Coal Co. Ltd. v. The State of Orissa and Ors. (1961] 2 S.C.R.
537, referred to.
Whether a particular levy is a fee or a tax has to be decided only by
C
reference to the terms of .the section.
Its pooition in the Act cannot
determine its nature ; an imposition which is by its terms a tax and not &
fee, cannot become a fee by reason of its having been placed in a certain
part of the Statute. (489 BJ
It is not right to say that s. 443 does not impose any duty on the
appellant and that therefore, the licence fee leviable under s. 548, should
be fixed only with reference to rendering of services.
The Corporation
D
has been set up only to perform municipal duties and its powers are for
enabling it to perform those duties.
But, since there is no provision for
aeivice being rendered, the levy cannot be a fee and would indisputably
be a tax. (490 B, C, DI
(ii) The fixing of the rate of a tax is not of the essence of legislative
fOWer and the fixing of rates may be leftto a non-legislative body. When
it is so left to another body the legislature must provide guidance for such y
ftxation.
Since there is sufficient guidance in the Act as to how tho rate
of the le\-y under s. 548 is to be fixed, the 1ection is valid.
(492 D, F; ·
493 G-H; 497 B]
.
The appellant is an autonomous body. It has to perform vario111
atatutory functions. It is given power to decide when and in what manner
the functions are to be performed.
For all this it needs money and it&
needs will vary from time to time with the prevailing exigencies.
Its
power to collect tax is necessarily limited by the expenses required to
F
discharge the functions.
It has, therefore, where rates have not been
apecified in the statute, to fix such rates as may be neceosarv to meet it&
needs, and that would be sufficient guidance to make tho exercise of it&
power to fix the rate, valid. , (496 D-F]
Case law reviewed.
(iii), The challenge to the levy on the ground that it amounts to expropriation is wholly unfounded.
•
G
No doubt the increase in the rate of fee was large but considering
the available seating capacity of the respondent, it cannot be said to be
unreasonably high.
(482 E-F]
The contention of the appellant that even if no guidance for taxation has been prescribed the section would still be valid, because, the Act
may be said to have been passed under Entry 5 of List II of the Seventh
Schedule to the Constitution and that, that Entry authorises the passing
H
of a law concerning the powers of a municipal corporation and that such
powers must necessarily include the power to levy a tax, was left open.
(497 D-E, H]
A
•
c
D
CALCUTTA CORP. v. LIBERTY CINEMA (Sarkar, J.)
479
Per Sobba Rao and Ayyangar, JI. (dissenting) (i) If on a
proper
construction of the Act one reached the conclusion that Part IV of the
Act w.. not exhaustive of the range of levies permitted by the Act, and
the fees permitted to be levied by s. 548(2) were also taxes, there would
be nothing in a. 127(3) or (4) to militate against that construction. But,
an examination of the provisions of the Act lnakes three matters abundantly .clear; (a) that the Act draws a sharp and clear distinction between
taxes properly so called and fees; (b) that the division into Parts and
Chapters is logical and clear-¢Ut and no matter which properly falls under
a subject set out under a Part or Chapter heading, is dealt ~th in any
other; and ( c) that taxes, by whatever designation they might be called,
arc all comprehended and dealt with by Part IV and by Part IV alone,
and that what ia permitted to be imposed by s. 548(2) is only a fee as
distinguished from a tax.
As admittedly there is no correlation between
the fee charged and the service rendered, the impugned levy was not
authoriaed and the High Coun was right
in granting relief to
the
respondent. (525 B-C; 526 D-G]
To say that to enable a fee strictly so called to be levied, an immediate advantage measurable in terms of money should be conferred on the
payer is to take too narrow a view of the concept of a fee.
The word
"services" in the context has to be understood in a wide sense, as including supervision and control over the activities for the excess of which
the fee is charged.
The judgements of this Court in the Shlrur
Mutt case, (1954] S.C.R. 1005, and the cases following it, do not lay
down that where an activity is regulated by licenses, the imposition of
charges for the inspection, supervision and control of the activity to ensure
compliance with the regulation is not a benefit conferred on the licensee,
so as to render the amount char11ed for such a licence not a fee in the
real sense, but a tax, whose constitutional validity could be sustained by
reference to the taxation entries in Lists I and II. [508 A; 515 F-G; 517 H;
518 Al
ea.. law considered.
Also, Art. 110(2) of the Constitution far from supporting the appellant's contention, negatives it. If pure taxation measures, employing the
machinery of licences and fees, would be money-bills, then the fees for
licences which are outside the definition, would be those fees which are
imposed to meet tho cost of regulation and supervision of an activity which
:r
ii controlled by the requirements of a licence and compliance with its
terms. Besides, if the levy of such licence-fees on various activities which
form the subject of legislative control or regulation under the various
non-taxation entries in the Lists were treated as tax, Entries 96 and 66
in the respective Lists would have to be read as taxation entries, because,
such a levy is permitted only by those entries. This however would be contrary to the entire scheme on which the several entries in the Lists are
made, namely, setting out the exclusive general legislative powers the
G enumeration of taxes which could be imposed and finally the power to
impose fees in respect of any of the matters in the List. (502 C; 519 B-C,
E, G]
(ii) Viewed as a tax the delegation in s. 548(2) is unconstitutional,
u essential legislative functions are parted with to the municipality, a
subordinate law-making body, and therefore the provision is unconstitutional. (546 Bl
H
Essential legislative functions cannot be delegated but where the law
lays down the principles and affords guidance to the subordinate lawmaking authority details may be left for being filled up by the executive
or by other authorities vested with quasi-legislative power.
The power
480
SUPREME
COURT
REPORTS
(1965) 2 S.C.R.
to fix a rate of tax is an essential legislative function and therefore, unless
the subordinate law-making authority is afforded guidance by the policies
being formulated, principles enunciated and standards laid down,
the
legislation will suffer from the vice of excessive delegation and would be
void as arbitrary and unconstitutional. The provisions of the Act do not
afford any guidance to the Municipal Corporation to fix the rate of levy.
No doubt, the municipal government of Calcutta was vested in the Cor·
poration under s. 24 of the Act, but the expression "government" does
not gather within its fold all powers necessary for administration nor does
it create an independent sovereign body entitled to legislate in any manner
it likes for the. purpose of carrying on civic government. The Corporation
is still a subordinate body which is the creation of the legislature and can
only function within the framework of the powers conferred upon it by
the Act. No assistance is derived in this regard from the powers of supervision which. the State Government has over the municipal affairs under
ss. 42 and 47 . If no standards have been laid down by the Act for the
Corporation to afford it a guidance for the fixation of a rate, the fact that
supervi.sory power is conferred upon the executive would not obviate that
objection, for the Government itself would have no guidance from the
legislature as to the policy to be adopted in exercising the supervision. [541
E-G; 542 C-G; 545 A]
It cannot be said that as a result of ss. 115, 117 and. 126 no taxes
could be raised ei<cept such as were needed for the expenditure for which
provision had been made in the budget and the rate of tax was, .therefore,
determined by the needs of the Corporation. If the amount of money
which a municipality needs for discharging its functions,
affords
any
auidance, tlren the needs of a State or the Union ought to afford sufficient
guidance to sustain the validity of any skeleton legislation. [545 A.CJ
The .Orissa Ceramic Industries Lttl. v. Executive Officer, lharsuguda
Municipality AI:R. 1963 Orissa 171 disapproved.
The quantum of power which a law could bestow upon an institution
or body of its creation is detennined, first, by the view of the legislature
as to what are necessary for achieving the purposes for which the institu·
lion or body is created and, secondly, by the overall limitations imposed
by the Constitution by the distribution of legislative power.
Nothina
therefore turns on the use of the word "powers" in Entry 5 of the List II
which deals. with the Constitution and powers of municipal ~orpora!iOM
for the purpose· of local self-government.
The State Legislature cannot,
therefore, authorise a municipal body which it creates, even though, it
be for the purpose of local self-Government, to exercise a power higher
than what it itself possesses. Any legislative practice prevailing before
lat April, 1937 when India was under a unitary form of government or
prevailing before the Constitution, does not serve as a guide for i)1!erpreting the legislative entries in the Constitution and any such legislative
practice cannot prevail over the limitations imposed by the distribution
of legislative power in respect of post-Constitution legislation. [527 F-0;
530 D, G; 532 F-G; 533 E-F; 534 CJ
The analogy d American decisions also cannot afford any guidane9
for th,tf application of a different rule as to what constitutes excessive delegati<Jfi in the case of legislation creating municipal ; bodies.
The rule to
limits of delegation by the legislatures constituted in India, by the Constitution, has been the subject of elaborate consideration by this Court and
the decisions have not laid down that a different rule applies when the
delegation of legislative power is in favour of a municipal corporation. [535
CD,E]
Case law considered.
A
B
c
D
E
F
G
H
CALCUTTA CORP, V. LIBEllTY CINEMA (Sarkar, /;)
'81
....
CmL APPELLATE JUlllSDicTION : Civil Appeal No. 26 . of
1961.
Appeal from the judgment and order dated July 26, 1961 of
the Calcutta High Court in Appeal from Original Order No. 67.
of 1959.
G. S. Pathak, A, N. Sinha and P. K. Mukherjee, for the
appellants.
Niren De, Additional Solicitor-General, N. C. Chatterjee, S.
Ghosh, I. B. Dad!IChanji and 0. C. Mathur, for the respondent.
D. N. ¥ukherjee, for the intervener No. 1.
Naunit Lal, for the intervener No. 2.
The Judgment of SAllAR, RAGHUBAll DAYAL and MUDHOLIAR. JJ. was delivered by SAllAR J. The dessenting Opinion of
SuIIBA RAo and AYYANGAll JJ. was delivered by AYYANGAll J.
»
Subr J. The appellant Corporation was constituted by the
Calcutta Municipal Act, 1951, an Act passed by the Legislature
of the State of West Bengal. The Act was intended to consolidate
and amend the law relating to the Municipal affairs of Calcutta
and it defined the duties, powers and functions of the Corporation
in whose charge those affairs were placed. The respondent is a
;S firm owning a cinema house and carrying on business of public
cinema shows.
Section 443 of the Act provides that no person shall without
a licence granted by the Corporation keep open any cinema-house
for public amusement. It, however, does not say that any fee is
:r to be paid for the licence. But sub-s. ( 2) of s. 548 says that for
every licence under tlie Act, a fee may, unless otherwise provided,
be charged at such rate as may from time to time be provided.
In 1948 the Corporation had fixed the scale of fees on the basis
of the annual valuation of the. cinema-homes made by a method
which does not appear on the record. The respondent had under
G these sections obtained a licence for its cinema house and had
been paying a licence fee calculated on the aforesaid basis. The
fee as calculated was Rs. 400 per year.
By a resolution passed on March 14, 1958 the Corporation
changed the basis of assesment of the licence fee with effect from
April 1, 1958. Under the new method the fee was to be assessed
JI at rates prescribed per show acording to the sanctioned . seating
capacity of the cinema houses. The respondent's cinema house
had SS 1 seats and under the changed method it became liable to a
482
SUPllBMB
COUllT
llBPORTS
[1965] 2 S.C.JL
fee of Rs. S per show. In the result it became liable to pay a fee
A
of Rs. 6,000 per year.
The respondent then moved the High Court at Calcutta under
Art. 226 of the Constitution for a writ quashing the resolution.
The application was first heard by Sinha J. who allowed it. ThiS
order was confirmed by an appellate Bench of the same Court a
consisting of Bose C. J. and C. K. Mitter J. on appeal by tho
Corporation. Hence the present appeal.
In this Court the levy was challenged on three grounds the.
first of which may be disposed of at once. That ground was that
the levy amounted to expropriation and was, therefore, invalid as
C
violating els. (f) and (g) of sub-Art. (1) of Art. 19. Sinha J.
rejected this contention as on the materials on the record it could
not be said that the new rate was so high as to make it impossible
for the respondent to carry on its business. The learned Judges
of the appellate Bench do not appear to have taken a different
view of the matter. It seems to us that a fee at the rate of Rs. -' D
per show in a house with a seating capacity of 551 cannot in any
sense be said to be unreasonably high. With that seating capacity
the respondent would at a reasonable estimate be collecting about
Rs. 1,000 per show and paying the sum of Rs. 5 per show. No
doubt the increase in the rate of fee from Rs; 400 to Rs. 6,000
per year was large.
But at the same time the circumstances
I!:
obtainin~ Jn our aountry had undergone an immense change
between 1948 when the fee was earlier fixed and 1958.
The
challenge to the levy on the ground that it amounted to expropriation is wholly unfounded and was rightly rejected in the High
Court.
Substantially the same argument was advanced from a
different point of view.
It was said that Art. 19(1 ), (f) and (g) r
were violated in any case as s. 548 gave an arbitrary power of
taXation. This contention found favour with the learned Judges
of the High Court but, with respect to them, we are unable to
agree. In our view, for reasons to be later stated, no arbitrary
power of taxation was conferred by s. 548.
The second challenge to the levy was put in this way. The
levy authorised by ss. 443 and 548 was a fee in return for services
G
to be rendered and not a tax and it had therefore to be commensurate with the costs incurred by .the Corporation in providing
those services. The present levy of. Rs. 6,000 per year was far
in excess of those costs and was for that reason invalid.
The H
Corporation's answer to this contention is that the levy was a tax
and not a fee taken in return for services and no question of its
CALCUTTA CORP. v. LIBERTY CINEMA (Sarkar, /.)
-'83
A being proportionate to any costs for services arose. The Corporatiop. d,.oes not dispute that if the levy was a fee in the sense
mentioned, it would be invalid.
The only question on this part
of the case, therefore, is, was the levy a fee in return for services?
Another subsidiary question is, what is the nature of the services
which makes a levy in respect of them, a fee ? It is not disputed
II that a levy made in return for services rendered would be a fee.
It is, therefore, unnecessary to consider what a fee is or the tesfi
by which it is to be determined. Nor is it necessary to discuss
whether in order that a levy may be a fee the statute imposing it
must intend primarily to confer the benefits of the services on those
C
who pay it and benefits received from those services by the public
at large, if any, must be secondary. A discussion of these aspects
of fees, will be unprofitable and will only cloud the point really in
iisuo.
Now, on the first question, that is, whether the levy is in return
for services, it is said that it is so because s. 548 uses the word
D
"fee".
But, surely, nothing turns on words used.
The word
''fee" cannot be said to have acquired a rigid technical meaning
in the English language indicating only a levy in return for
iervices. No authority for such a meaning of the word was cited.
However that may be, it is conceded by the respondent that the
E
Act uses the word "fee" indiscriminately.
It is admitted that
some of the levies authorised are taxes though called fees. Thus,
for example, as Mitter J. pointed out, the levies authorised by ss.
218, 222 and 229 are really taxes though called fees, for no
services are required to be rendered in respect of them. The Act,
therefore, did not intend to use the word fee as referring only "to
I' a levy in return for services.
This contention is not really open to the respondent for s. 548
does not use the word "fee"; it uses the words "licence fee" and
those words do not necessarily mean a fee in return for services.
In fact in our Constitution fee for licence and fee for services
G
rendered are contemplated as different kinds of levy. The former
is not intended to be a fee for services rendered. This is apparent
from a consideration of Art. 110 ( 2) and Art. 199 ( 2) where both
the expressions are used indicating thereby that they are not the
same. In Shannon v. Lower Mainland Dairy Products Board(')
it was observed at pp. 721-722, "if licences are granted, it appears
H
to be no objection that fees should be charged in order either to
defray the costs of administering the local regulation or to increaso
(1) [1938] A. C. 708
484
SUPllBM'.11 COtmT llBPOllTS
Ll96S] 2 S.c.R.
the general funds . of the Province or for both purposes ...•.. It A
cannot, as their Lordships think, be an objection to a licence plus
a fee that it is direeted both to the regulation of trade and to the
provision of revenue." . It would, therefore, appear that a provision for the imposition of a licence fee does not necessarily lead
to the conclusion that the fee must be only for services rendered.
'
B
It may also be stated that a statute has to be read so as to make
it valid and, if possible, an interpretation leading to a contrary
position should be avoided; it has to be construed ut res magil
valeat quam pareat: see Broom's Legal Maxims (10 ed.) p. 361,
Craies on Statutes (6th ed.) p. 95 and Maxwell on Statutes (11th
ed.) p. 221. Therefore again, the word "fee" in s. 548 should be c
read as meaning a tax, for as we shall show later, it made no
provision for services to be rendered; any other reading would
make the section invalid. A construction producing that re5ult
has to be avoided. We do not also think that by reading the
word as referring to a tax we would be doing any violence to the
. language used.
D
If the word "fee" is not conclusive of the question that it must
be in return for services, as we think it is not, then the question
whether the fee contemplated in s. 548 is a fee in return for
services, can only be decided by reference to the terms of the
section and for this purpose we have to consider that section J:
along with s. 443. We have earlier summarised the sections but
now propose to set them out so far as material·:
S. 443. No person shall, without or otherwise than
in conformity with the terms of a licence granted ....
keep open any .....• cinema house ...•.
S. 548. (1) Every licence ...... granted unCler this
Act ...•.... shall specify,
.............................
. . . . . . . . . . . . . . . . . . . . .. . . . . . . .
F
( 1) the tax or fee, if any, paid for the licence. . . . . . .
G
(2) Except when it is ........•. otherwise express~
ly provided, for every such licence .......... a
fee
may be charged at such rate as may from time to time
be fixed by the Corporation ......... .
The sections do not refer to the rendering of any service by the
11
Corporation. Looking at them we do not find anything to lead
to the conclusion that they make it incumbent on the Corporation
CALCUTTA COllP. v. LmBllTY OJNBMA (Sarkar, J.)
485
A to render any service. in return for the fee imposed. Stopping
here, therefore, tll,ere is no reason for saying that the levy is a
fee ,in return for services.
But it was said that the services to be provided for the levy
of the fee are set out in the by-laws made under s. 527, item 43'.
a Item 43 permits by-laws to be framed regulating the inspection,
supervision and control, among others,
of cinema houses.
It
does not however make it obligatory on the Corporation to make
any by~law. If the by-laws are not made, there would,
ex
lrypothesi, be no services to render. No doubt s. 443 contemplates that the cinema shows shall be conducted in conformity
C with the terms of the licence but it again seems to us that it is
optional· for the Corporation to impose terms; it is not bound to
do so. In any case, those terms need not be for rendering of
ICI'liccs by the Corporation. They may, for example, provide
that the shows will not be continued after a certain hour in the
11Vening.
D
In fact, however, certain by-laws, called Theatre By-laws,
were framed by the Corporation. Those by-laws were
not
produced before us excepting one which· states, "The Chairman
may cause all such premises to be inspected at least twice yearly
and if as the result of such inspection any defect or disorder be
11:
11oticed in such premises in connection with and relating to any
of the matters or things referred to in these by-laws, the Chairman may by written notice require the owner or lessee of such
premises to make good such defects." It is quite clear that the
words ''the matters or things referred to in these by-laws" occurring in the by-law quoted, contemplate things to be done by the
F licensee and not by the Corporation. Those matters or things
cannot be services which the Corporation is required to render. It
would, therefore, appear that even the by-laws the terms of which
might have been incorporated in the licence do not contemplate
the rendering of any service by the Corporation to the licensee.
G It may be stated that the licence granted to the respondent does
not appear in the records of this case.
It is however said that the by-law earlier quoted requires inspection of the cinema houses by the Corporation and that that
was the service ~
the Corporation had to render in return for
the licence fee. We are unable to accept this contention. The
H inspcctioii wils not certainly a senice to the licensee; it was
necessary only to make sure that he carried out the conditio~ on
which the licence had been granted to him. It was something to
•
486
SUPREME
COURT
REPORTS
(1965] 2 s.c.~
be done to control the licensee's activities and to make him A
observe the conditions of the licence on pain of cancellation . of
the licence. This is clear from sub-s. (3) of s. 548 which states
that "any licence ........ granted under this Act ........ may
at any time be suspended or revoked ........ if any of its restrictions or conditions is infringed or evaded by the grantee." This
non-observance of the conditions of the licence would expose the B
licensee to penalty under s. 537 of the Act. The inspection was
therefore necessary also for enforcing ·the conditions of · the
licence by penalising a breach of them by the licensee. We
cannot imagine that an inspection by the Corporation for such
purposes can at all be said to be rendering of service to the C
licensee.
The nature of services to be rendered in return for a levy so
as to make it a fee has been considered by this Court in several
cases and in all of them it has been said that the services must
confer some benefit on the person paying the fee.
The earliest
case on the subject appears to be The Commissioner, Hindu
D
Religious Endowments, Madras v. Sri
Lakshmindra
Thirtha
Swamiar of Sri Shirur Mutt( 1 ), where it was said at p.
1042,
'a fee is a payment for a special benefit or privilege .... Public
interest seems to be at the basis of all impositions, but in a fee it
is some special benefit which the individual receives".
It was
E
again said at p. 1043, that in the case of fees for services "the
Government does some positive work for the benefit of persons
and tho money is taken as the return for the work done or
services rendered."
This case was concerned with .a statute
which imposed a levy on religious institutions expressly said to be
in return for services. The services mentioned in the. statute F
consisted among others in the Government
supervising
the
management of the institutions, auditing their accounts and seeing
that their income was duly appropriated to the purposes for
which they were founded. Though it did not expressly say so,
this Court was presumably of the view that these were services to
the institutions making the levy a fee, for it declared the levy G
invalid on the ground that it was not correlated to the costs of
those services and therefore was a tax which was beyond the
competence of the Madras Legislature which had enacted
the
statute. It would appear that the services here considered were
not for controlling the institutions but for doing work which
secured to them their funds and the proper application of them.
H
The statute might have involved a check on the conduct of the
(I) [l<J54] S.C. R .
CALCUTTA CORP. 11. LIBERTY CINEMA (Sarkar, /,)
487
A Mathadipatis who managed the institutions but that control alllO
was for the benefit of the institutions. It has to be remembered
as was said in another case to which we shall presently refer, that
the Mathadipatis were in the position of trustees of the institu·
tions.
It would follow that control of their wrongful activities
must result in special benefits to the institutions for their funds
B
would not then be frittered away.
After this judgment, the section imposing
the levy wu
amended but the amended section was also challenged on similar
grounds. The matter again came up to this Court in the case of
H. II. Sudhundra Thirtha Swamiar v. Commissioner for Hindu
C Religious & Charitable Endowment$, Mysore('). This time the
validity of the section was upheld. The reasons for this decision
are not relevant to the present discussion. As to the nature of
services however, this Court reiterated the view stated in
the
earlier case. It said at p. 323, "If with a view to provide a
specific service, levy is imposed by law and expenses for mainD
taining the service are met out of the amounts collected there·
being a reasonable relation between the levy and the expenses.
incurred for rendering the service, the levy would be in thit
nature of a fee and not in the nature of a tax." It was further
said, "A fee being a levy in consideration of rendering service of
I. a particular type, correlation between the expenditure by the
Government and the levy must undoubtedly exist." The act waa
the same as the earlier one in regard to the services to be rendered
by the Government and the view expressed in the earlier judg·
ment as to the nature of the services required by the statute to be
performed was endorsed in this judgment. It was said at p. 312,
r
that the Mathadipati "is by virtue of his office under an obligation to discharge the duties as a trustee and is answerable aa
such". It would follow that a service resulting in the control of
the Mathadipati would confer special benefit on the institution
which alone paid the levy.
Both these cases discμssed other tests bltsides the
require·
G ment of the rendering of services for determining whether a levy
is a fee, but with these· we are not concerned in the present case.
These cases also discussed the correlation of the costs of the
services to the levy but with that also we are not concerned as it
is not sought to uphold the present levy on the ground of such
B
correlation.
We have referred to these cases only for showing
that to make a levy a fee the services rendered in respect of it
(I) (1965) Supp. 2 S. C. Jl. 302
USup./65-15
<&88
SUPREMB
COURT
REPORTS
(1965] 2 S.C.R.
must benefit, or confer advantage on, the person who pays the A
levy ..
The other case to which we wish to refer in this connection
ia The Hingir-Rampur Coal Co. Ltd. v. The State of Orissa and
ors.('). There the imposition by a certain statute of a levy on
lessees of coal mines in a certain area and the creation of a fund B
with it, was called in question. It was held that the levy was a
fee in return for services and was valid. It was there said at p.
549, "If the special service rendered is distinctly and primarily
meant for the benefit of a specified class or area, the fact that in
benefitting the specified class or area the State as a whoie may
ultimately and indirectly be benefitted would not detract from the C
character of the levy as a fee." It may be mentioned that the
levy there went to meet expenditure necessary or expedient for
providing amenities like communication, water supply and electricity for the better development of the mining area and to meet
the welfare of the labour employed and other persons residing or
working in the area of the mines. Here again there is no element D
of control but the services resulted in real benefit specially
accruing to the persons on whom the levy was imposed. These
decisions of this Court clearly establish that in order to make a
levy a fee for services rendered the levy must confer special
llenefit on the persons on whom it is imposed. No case has been E
brought to our notice in which it has been held that a mere
control exercised on the activities of the persons on whom the
levy is imposed so as to make these activities more onerous, is
.service rendered to them making the levy· a fee.
It was also contended that the levy under s. 548 must be a
tee and not a tax, for all provisions as to taxation are contained F
in Part IV of the Act, while this section occurred in Chapter
XXXVI headed "Procedure" in Part VIII which was without a
heading. It was pointed out that Part V dealt with "Public
Health, Safety and Convenience" and s. 443 which was included
in Chapter XXVI contained in this Part was headed "Inspection G
and R~gnlation of Premises, and of Factories, Trades anc! Places
of Public Resort". A cinema house, it is not disputed, is included
in the words "places of public resort". It was, therefore. contended that a levy outside Part IV could not be a tax and hence
m~st be a fee for services.
This contention was sought to be
supported by the argument that s. 443 occurred in a Part conH
.cerning public health, safety and convenience and therefore the
(I) [1961] 2 S. C.R. 537
r
CALCUTTA CORP. v. LIBERTY CINEMA (Sarkar, /.)
489
A intontion was that the levy authorised by the section would be in
return tor work done for securing public health, safety and
coiivenience and was hence a fee.
We are wholly unable to
accept this contention. Whether a particular levy is a fee or tax
has to be decided only by reference to the terms of the section
a~ 'l\e have earlier stated. Its position in the Act cannot deterB minf. its nature; an imposition which is by its terms a tax and not
a fee, which in our opinion the present imposition is, cannot
become a fee by reason of its having been placed in a certain part
of the statute. The reference to the heading of Part V can at
most indicate that the provisions in it were for conferring benefit
C
On the public at large. . The cinema house owners paying the levy
would not as ·such owners be getting that benefit. We are not
concerned with the benefit, if any, received by them ~s members
of the public for that is not special benefit meant for them. We
are clear in our mind that if looking at the terms of the provision
authorising the levy, it appears that it is not for special services
n rendered to \he person on whom the levy is imposed, it cannot
be a fee wherever it may be placed in the statute. A consideration of where ss. 443 and 548 are placed in the Act is irrelevant
for determining whether the levy imposed by them i~ a fee or a
tax.
E
The last argument in this co!IIlection which we have to notice
was based on ss. 126 and 127 of the Act. Section 126 deals with
the preparation by the Chief Executive Officer of the Corporation
called Commissioner, of the a!IIlual budget. The budget has to
include an estimate of receipts from all sources. These receipts
would obviously include taxes, fees, licence fees and rents. Under
. F
s. 127 (3) the Corporation has to pass this budget and to determine, subject to Part IV of the Act, the lrvy of consolidated rates
and taxes at such rates as are necessary to. provide for
the
purposes mentioned .in sub-s. ( 4). Sub-section ( 4) requires the
Corporation to make adequate and suitable provision for such
services as may be required for the fulfilment o(the several duties
G imposed by the Act· and for certain other things to which it is not
necessary to refer. The first point made was that these sections
showed that the Act made a distinction between fees and taxes.
It does not seem to us that anything turns on this as the only
question now is whether the levy under s. 548 is a fee. The other
paint was that els. (3) and ( 4) of s. 127 showed that the CorpoH ration could fix ·the consolidated rates and taxes and that the
determination of rates for these had to be in accordance with tho
11ceds for carrying out the Corporation's duties under the Act.
SUPUME COUJ.T
UPOl.TS
[196S] 2 s.c.n. '
It was said that as the licence fee leviablo under s. 548 did not
A.
relate to any duty of the Corporation under the Act, it . being
optional for the Corporation to impose tenns for grant of licen~
for cinema houses, the rate for that fee was not to be fixed
~
reference to anything except rendering of services.
We
are
unable to accept this argument and it is enough to say in regard •
to it that it is not right that s. 443 does not impose a duty on the
Corporation .. We think it does so, though in what manner an~
when it will be exercised it is for the Corporation to decide. It Ii
impossible to call it a power, a8 the respondent wants to do, for
it is not given to the Corporation for its own benefit. The Corporation has been set up only to perform municipal duties and its c
powers are for enabling it to perform those duties. Furthermore
there is no doubt that an estimate of the licence fee has to be
included in the budget and therefore the word "tax" in s. 127 (3)
must be deemed to include the levy under s. 548. The words
"subject to the provisions of Part IV" in s. 127 (3) must be read,
with the addition of the words "where applicable". If that levy I)
cannot be a fee because there is no provision for service being
rendered in respect of it, it would indisputably be a tax. As such
again, its rate can be determined under s. 127 (3) to provide for
the discharge of at least the other undisputed duties of the Corporation. We would, therefore, reject this last argument also.
The conclusion to which we then arrive is that the levy under E
s. 548 is not a fee as the Act does not provide for any services of
special kind being rendered resulting in benefits to the person on
whom it is imposed. The work of inspection done by the Corporation which is only to see that the t11nns of tiie licence are
observed by the licensee is not a service to him. No question hero F
arises of correlating the amo\lllt of the levy to the costs of any
service. The levy is a tax. It is not <!isputed, it may be stated,
that if the levy is not a fee, it must be 3 tax·
It was then said that if s.