# THE HINGIR"RAMPUR COAL CO., LTD. AND OTHERS v. THE STATE OF ORISSA AND OTHERS

- **Citation:** [1961] 2 S.C.R. 537
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Bench:** P. B. Gajendragadkar, A. K. Sarkar, K. Subba Rao, K. N. Wanchoo, J. R. MuDHOLKAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-hingir-rampur-coal-co-ltd-and-others-v-the-state-of-orissa-and-others-1980
- **Pages:** 48

## Headnote

Mining Areas, Development of--Enactment by State Legislature authorising constitution of mining areas and development
fund-Imposition of cess-Constitutional validity-Competency of
State Legislature-Orissa Mining Areas Development Fund Act,
z952 (Orissa XXV II of I952), s. 4-Constitution of India, Art. 372,
Seventh Schedule, List II, Entry 23, 66, List I, Entries 52, 54, 84Adaptation of Laws Order, z950, els. z6, 2I.
The petitioners challenged the constitutional validity of
the Orissa Mining Areas Development Fund Act, 1952, which
by s. 3 empowered the State Government to constitute mining
areas for the purpose of providing them with certain amenities
after hearing objections from the lessees, by s. 4 to impose and
collect a cess not exceeding 5 % of the valuation of the minerals
at the pit's mouth and by s. 5 created a fund to which the cess
was to be credited. The petitioners' case, inter alia, was that the
impugned Act and the rules made thereunder were ultra_vires the
powers of the State Legislature, the cess levied thereunder was
not a fee but a duty of excise on coal within Entry 84 of List I
of the Seventh Schedule to the Constitution and repugnant to
Coal Mines Labour Welfare Fund Act, 1947 (Act XXXll of 1947),
and, alternatively, even supposing it was a fee relatable to Entries 23 and 66 of List II, it was hit by Entry 54 of List I read
with the Mines and Minerals (Regulation and Development) Act
1948 (Act Lill of 1948), or. by Entry 52 of List I read with the
Industries (Development and Regulation) Act •. 1951 (Act LXV of
1951). It was urged on behalf of the State, inter alia, that the
cess was a fee and not a duty of excise and the competence of
the State Legislature to levy it was not affected by the Central
Acts.
Held (per Gajendragadkar, Sarkar, Subba Rao and Mudholkar, JJ.), that the cess imposed by the Act was a fee relatable to
Entries 23 and 66 of List II of the Seventh Schedule to the
Constitution and the Constitutional validity of the impugned
Act was beyond question.
Although there. can be no generic difference between a tax
and a fee since both are compulsory exactions of money by public
11u~horities, there is this distinction between them that whereas
a tax is imposed for public purposes and requires no consideration to support it, a fee is levied essentially for services rendered
and there must be an element of quid pro quo between the person
November 111.
538
SUPREME COURT REPORTS
[1961]
z960
who pays it and the public authority that imposes it. While a
tax invariably goes into the consolidated fund, a fee is earmarkTh• Hingired for the specified services in a fund created for the purpose.
Rampur Coal Co .. Whether a cess is one or the other would naturally depend on
Lid. &- Others
the facts of each case. If in the guise of a fee, the Legislature
v.
imposes a tax, it is for the Court on a scrutiny of the scheme of
The Slat• of
the levy, to determine its real character. The distinction is
Orissa ..S- Olhers recognised by the Constitution which while empowering the
appropriate Legislatures to levy taxes under the Entries in the
three lists refers to their power to levy fees in respect of any
such matters, except the fees taken in court, and tests have been
laid down by this Court for determining the character of an impugned levy.
Matthews v. Chicory Marketing Board, 60 C.L.R. 263, The
Commissioner, Hindu Religious Endowments, Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] S.C.R.
1005, Mahant Sri ]agannath Ramanuj Das & Anr. v. The State of·
Orissa, [1954) S.C.R. 1046, and Ratilal Panachand Gandhi v. The
State of Bombay, [r954] S.C.R. 1055, referred to.
P. P. Kutti Keva & Ors. v. The State of Madras, A.LR. 1954
Mad. 621, Attorney-General for British Columbia v. Esquimalt and
Nanaimo Railway Co., (1950) A.C. 87 and Parton & Anr. v. Mils
Board (Victoria). (1949) 80 C.L.R. 229, considered and held inapplicable.
In determining whether a levy is a fee the true test must be
whether its pri

## Text

_Characters 0–39,761 of 111,934. This is a partial read: ask again with offset=39761 for what follows._

2 S.C.R. SUPREME COURT REPORTS
537
THE HINGIR"RAMPUR COAL CO., LTD.
AND OTHERS
v.
THE STATE OF ORISSA AND OTHERS
(P. B. GAJENDRAGADKAR, A. K. SARKAR, K. SUBBA
RAO, K. N. WANCHOO and J. R. MuDHOLKAR, JJ.)
Mining Areas, Development of--Enactment by State Legislature authorising constitution of mining areas and development
fund-Imposition of cess-Constitutional validity-Competency of
State Legislature-Orissa Mining Areas Development Fund Act,
z952 (Orissa XXV II of I952), s. 4-Constitution of India, Art. 372,
Seventh Schedule, List II, Entry 23, 66, List I, Entries 52, 54, 84Adaptation of Laws Order, z950, els. z6, 2I.
The petitioners challenged the constitutional validity of
the Orissa Mining Areas Development Fund Act, 1952, which
by s. 3 empowered the State Government to constitute mining
areas for the purpose of providing them with certain amenities
after hearing objections from the lessees, by s. 4 to impose and
collect a cess not exceeding 5 % of the valuation of the minerals
at the pit's mouth and by s. 5 created a fund to which the cess
was to be credited. The petitioners' case, inter alia, was that the
impugned Act and the rules made thereunder were ultra_vires the
powers of the State Legislature, the cess levied thereunder was
not a fee but a duty of excise on coal within Entry 84 of List I
of the Seventh Schedule to the Constitution and repugnant to
Coal Mines Labour Welfare Fund Act, 1947 (Act XXXll of 1947),
and, alternatively, even supposing it was a fee relatable to Entries 23 and 66 of List II, it was hit by Entry 54 of List I read
with the Mines and Minerals (Regulation and Development) Act
1948 (Act Lill of 1948), or. by Entry 52 of List I read with the
Industries (Development and Regulation) Act •. 1951 (Act LXV of
1951). It was urged on behalf of the State, inter alia, that the
cess was a fee and not a duty of excise and the competence of
the State Legislature to levy it was not affected by the Central
Acts.
Held (per Gajendragadkar, Sarkar, Subba Rao and Mudholkar, JJ.), that the cess imposed by the Act was a fee relatable to
Entries 23 and 66 of List II of the Seventh Schedule to the
Constitution and the Constitutional validity of the impugned
Act was beyond question.
Although there. can be no generic difference between a tax
and a fee since both are compulsory exactions of money by public
11u~horities, there is this distinction between them that whereas
a tax is imposed for public purposes and requires no consideration to support it, a fee is levied essentially for services rendered
and there must be an element of quid pro quo between the person
November 111.
538
SUPREME COURT REPORTS
[1961]
z960
who pays it and the public authority that imposes it. While a
tax invariably goes into the consolidated fund, a fee is earmarkTh• Hingired for the specified services in a fund created for the purpose.
Rampur Coal Co .. Whether a cess is one or the other would naturally depend on
Lid. &- Others
the facts of each case. If in the guise of a fee, the Legislature
v.
imposes a tax, it is for the Court on a scrutiny of the scheme of
The Slat• of
the levy, to determine its real character. The distinction is
Orissa ..S- Olhers recognised by the Constitution which while empowering the
appropriate Legislatures to levy taxes under the Entries in the
three lists refers to their power to levy fees in respect of any
such matters, except the fees taken in court, and tests have been
laid down by this Court for determining the character of an impugned levy.
Matthews v. Chicory Marketing Board, 60 C.L.R. 263, The
Commissioner, Hindu Religious Endowments, Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] S.C.R.
1005, Mahant Sri ]agannath Ramanuj Das & Anr. v. The State of·
Orissa, [1954) S.C.R. 1046, and Ratilal Panachand Gandhi v. The
State of Bombay, [r954] S.C.R. 1055, referred to.
P. P. Kutti Keva & Ors. v. The State of Madras, A.LR. 1954
Mad. 621, Attorney-General for British Columbia v. Esquimalt and
Nanaimo Railway Co., (1950) A.C. 87 and Parton & Anr. v. Mils
Board (Victoria). (1949) 80 C.L.R. 229, considered and held inapplicable.
In determining whether a levy is a fee the true test must be
whether its primary and essential purpose is to render specific
services to a specified area or class, it being of no consequence
that the State may ultimately and indirectly be benefited by it.
So judged, the scheme of the impugned Act leaves no manner of doubt that the levy authorised by it is a fee and not a
tax.
The amount of the levy must depend on the extent of the
services sought to be rendered and if they are proportionate, it
would be unreasonable to say that since the impost is high it
must be a duty of excise. The rate specified by s. 4(2) of the
Act, therefore, cannot by itself alter the character of the levy
and constitute a trespass by the State Legislature on the legislative powers of the Parliament under Entry 84 of tb.e List I.
Nor can the method prescribed by the Legislature for recovering the levy by itself alter its character. The method is a
matter of convenience and, though relevant, has to be tested in
the light of other relevant circumstances. It is not permissible
to challenge tb.e vires of a statute relatable to an Entry in List
II solely on the ground that the method adopted for the recovery of the impost can . and generally is adopted in levying a
duty of excise.
Ralla Ram v. The Province of East Punjab, [1948] F.C.R. 207,
Byramjee ] eejeebhoy v. The Province of Bombay & Anr. I.L.R.
2 S.C.R. SUPREME COURT REPORTS
539
1940 Born. 58 and Governor-General in Council v. Province of
I96o
Madras, (1945) L.R. 72 I.A. 91, considered.
. .
The limitation imposed by the latter part of Entry 23 of
The H•ngirList II is a limitation on the legislative competence of the State Rampur Coal Co.
Legislature itself and the test whether a statute passed by the
Ltd. cS- Others
State Legislature thereunder was ultra vires would be whether
v.
the requisite declaration under Entry 54, List I, has been made
Th• Stal• 01
by Parliament by law :covering the same field or not; it is not Orissa cS- Others
necessary in order to make the declaration effective that rules
should also be made and enforced.
Although by operation of Art. 372 of the Constitution Act
LIU of 1948 was an existing Act substantially covering the
same field as covered by the impugned Act, there was no adaptation of s. 2'of that Act whereby a declaration implied by it could
be said to have been adapted to a declaration by Parliament.
Clause 16 of the Adaptation of Laws Order, 1950, properly construed, cannot be held to refer to the Dominion Legislature and
equate it with the Parliament. It can be resorted to only where
the existing law expressly refers to some authority that c.an be
equated with the :corresponding new authorities. Since the
Dominion Legislature was not so referred to, its competence
under the Constitution Act of 1935, repealed by the Constitution
of India, was 'clearly outside the clause. Nor can cl. 21 of the
order be of any help to the petitioners.
Consequently, in the absence of the requisite Parliamentary
declaration, the competence of the Orissa State Legislature
under Entry 23 read with Entry 66 of the List II was not
impaired and the imp11gned Act must be deemed to have repealed the Central Act, so far as that State was concerned.
This case incidentally discloses that in regard to the requisite
Parliamentary declaration prescribed by Entry 54 in List I in its
application to the pre-constitution Acts under corresponding
Entry 36 in List I of the Cpnstitution Act of 1935, there is a
lacuna which has not been covered by any clauses of the Adaptation of Laws Order, 1950.
Nor was the impugned Act ultra vires the State Legislature by
operation of Entry 52 of List I read with s. 2 of the Industries
(Development and Regulation) Act, 1951 (LXV of 1951). That
Act, in pith and substance, deals more directly with the co11trol
of certain specified industries including the coal industry, while
the impugned Act is concerned with the development of the
mining areas notified under it. The field covered by the two
Acts was not, therefore, the same.
Per Wanchoo, J.-In order to determine whether a levy is
a tax or a fee, what has to be considered is the pith and substance of the levy. Where the levy in pith and substance is not
essentially different from a tax, it cannot be converted into a
fee by crediting it to a special fund and attaching certain services to it.
540
SUPREME COURT REPORTS
[1961]
I960
The Commissiontr, Hindu Religious Endowments, Madras, v.
Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mull, [1954]
The HingirS.C.R. 1005, Mahant Sri Jagannath Ramanuj Das v. The State of
Rampur Coal Co., Orissa, [1954] S.C.R. rn46 and Ratilal Panachand Gandhi v. The
Ltd. & Others
State of Bombay, [1954] S.C.R. rn55, discussed.
v.
A duty of excise in pith and substance is primarily a duty
The State of
levied on a manufacturer or producer in respect of the commoOrissa <!>Others dity manufactured or produced. It is different and distinct from
a sales tax and in law they do not overlap.
Governor-General in Councilv. Province of Madras, 72 I.A. 91,
referred to.
What the impugned Act did was to provide for the levying
of the cess on the goods produced at a rate not exceeding five
per centum of the value at ·the pit's mouth. The cess was,
therefore, in pith and substance a duty of excise falling within
Entry 84 of List I, which the State legislature could not levy.
It was not correct to say that the method employed by the
impugned Act for realising the cess was a mere method of quantification and did not affect its character which was that of a fee.
In the present case the very mode of the levy of the cess is
nothing other than the levy of a duty of excise, and, therefore,
the principle of quantification for purposes of a fee could not be
so extended as to convert what was in pith and substance a tax
into' a fee.
Sri Byramjee Jeejeebhoy v. The Province of Bombay, I.L.R.
1940 Born. 58, Municipal Corporation, Ahmedabad v. Patel Gordhandas Horgovandas, I.L.R. 1954 Born. 41 and Ralla Ram v. The
Province of East Punjab, [1948] F.C.R. 207, considered.
K. C. Gajapati Narayan Deo v. The State of Orissa, [1954]
S.C.R. l, referred to.
.
The cess levied under s. 4 of the Act could not be justified
as a tax on mineral rights under Entry 50 of List II of the
Seventh Schedule and the impugned Act was in effect a colourable piece of legislation.
ORIGINAL JURISDICTION: Petition No. 87 of 1959.
Petition under Art. 32 of the Constitution of India
for enforcement of Fundamental Rights.
M. P. Amin, Dara P. Mehta, P. lJf. Amin, S. N.
Andley, J.B. Dadachanji, Rameshwar Nath and P. L.
Vohra for the petitioners.
A. V. Viswanatha Sastri, R. Ganapathy Iyer, P. Kesava Pillai and T. M. Sen, for the respondents.
H. N. Sanyal, Additional Solicitor-General of India,
B. Sen and R. H. Dhebar, for the Intervener.
2 S.C.R. SUPREME COURT REPORTS
541
1960. November, 21. The Judgment of P. B.
r96o
Gajendragadkar, A. K. Sar~ar, K. Subba R~o and
The HingfrJ. R. Mudholkar, JJ., was delivered by P. B. GaJendra- Rampur Coal Co.,
gadkar J., K. N. W anchoo, J., delivered a. separate Ltd. &- Another
.:-... ..J,.. ......... __ ....
JUU!::;ll.lt'11~.
v.
The State of
GAJENDRAGADKAR, J.-This is a petition filed Orissa &- Others
under Art. 32 of the Constitution in which the validity
of the Orissa Mining Areas Development ]'und Act, Gajendragadkar ].
1952 (XXVII of 1952), is challenge'd. The first petitioner is a public limited company which has its registered office at Bombay. A large majority of its shareholders are citizens of India; some of them are themselves companies incorporated under the Indian Companies Act. Petitioners Nos. 2 to 7 are the Directors
of Petitioner No. 1, the second petitioner being the
Chairman of its Board of Directors. These petitioners
are all citizens of India. At all material times the
first petitioner carried on and still carries on the business of producing and selling coal excavated from its
collieries at Rampur in the State of Orissa. Two leases
have been executed in its favour; the first was executed on October 17, 1941, by the Governor of Orissa
whereby all that piece or parcel of land in the registration district of Samba.lpur admeasuring about
3341. 79 acres has been demised for a period of 30
years commencing from September 1, 1939, in consideration of the rent reserved thereby and subject to the
covenants and conditions prescribed thereunder; and
the second is a surface lease executed in its favour by
M.r. Mohan Brijraj Singh Deo on April 19, 1951, in
relation to a land admeasuring approximately 211.94
acres for a like period of 30 years ·commencing from
.February 4, 1939, in consideration of the rent and
subject to the terms and conditions prescribed by it.
Pursuant to s. 5 of the Orissa Estates Abolition Act,
1951, all the right, title and interest of the Zamindar
of Rampur in the lands demised to the first petitioner
under the second lease vested in respondent 1,. the
State of Orissa. Since then the first p~titioner has
duly paid the rent reserved, by the said lease to the
appropriate authorities appointed by respondent 1,
~
.
542
SUPREME COURT REPORTS
(1961)
r96o
·and has observed and performed all the conditions and
Th w .
convenants of the said lease. In exercise of its rights
Ramp'.., ';0~;-co. under the said two leases the first petitioner entered
Ltd. & Others 'upon the lands demised and has been carrying on the
v.
J::irrsinesg of excavating and producing coal at its collieTh• state of
ries at Rampur.
Onssa & Others
In December, 1952, the Legislature of the State of
Ga -..a:::-:a""' 1. Orissa passed the impugned Act.; and it received the
1
g
assent of the Governor of Onssa on December 10,
1952. It was, however, not reserved for the consideration of the President of India nor has it received
his assent. In pursuance of the rule-making power
conferred on it by the impugned Act respondent 1 has
purported to make rules called the Orissa Mining
Areas Development Act Rules, 1955; these rules have
been duly notified in the State Gazette on January
25, 1955.
Subsequently, the Administrator, respondent 2,
appointed under the impugned Act issued a notification on June 24, 1958, whereby the first petitioner's
Rampur colliery has been notified for the purpose of
liability for the payment of cess under the impugned
Act. The area of this colliery has been determined
at 3341 ·79 acres. In its appeal filed under rule 3
before the Director of Mines the first petitioner objected to the issue of the said notification, inter alia, on
the ground that the impugned Act and the rules
framed under it were ultra vires and invalid; no action
has, however, been taken on the said appeal presumably because the authority concerned could not entertain or deal with the objections about the vires of the
Act and the rules.
Thereafter on March 26, 1959, the Assistant Administrative Officer, respondent 3, called upon the
first petitioner to submit monthly returns for the
assessment of the cess.
The first petitioner then
represented that it had filed an appeal setting forth
its objections against the notification, and added that
until the said appeal was disposed of no returns would
be filed by it. In spite of this representation respondent 3, by his letter of May 6, 1959, called upon the
2 S.C.R. SUPREME COURT REPORTS
543
first petitioner to submit monthly returns in the presz96o
cribed form and issued the warning that failing comTh H"
.
pliance the first petitioner would be prosecuted under Ramp;., i;;;;-co.
s. 9 of the impugned Act. A similiar demand was
Lid. <?>-Other$ '
made and a similar warning issued by respondent
v.
3 by his letter dated June 6, 1959. It is under
The State of
these circumstances that the present petition has been Orissa & Others
filed.
G · a-elk J
The petitioners contend that the impugned Act and a;en raga
ar •
the rules made thereunder are ultra vires the powers of
the Legislature of the State of Orissa, or in any event
they are repugnant to the provisions of an existing
law. According to the petition the cess levied under
the impugned Act is not a fee but is in reality and in
substance a levy in the nature of a duty of excise on
the coal produced at the first petitioner's Rampur colliery, and as such is beyond the legislative competence
of the Orissa Legislature. Alternatively it is urged
that even if the levy imposed by the impugned Act is'
a fee relatable to Entries 23 and 66 in List II of the
Seventh Schedule, it would nevertheless be ultra vires
having regard to the provisions of Entry 54 in List I
read with Central Act LUI of 1948.
The petitioners
further allege that even if the said levy is held to be
a fee it would be similarly ultra vires having regard
to Entry 52 in List I read with Central Act LXV
of 1951. According to the petitioner,s the impugned
Act is really relatable to Entry 24 in List III, and
since it is repugnant with Central Act XXXII of 1947
relatable to the same Entry and covering the same
field the impugned Act is invalid to the extent of the
said repugnancy under Art. 254. On these allegations
the petitioners have applied for a writ of mandamus
or a writ in the nature of the said writ or any other
writ, order or direction prohibiting the respondents
from enforcing any of the provisioil.s of the impugned
Act against the first petitioner; a similar writ or order
is claimed against respondent 3 in respect of the
letters addressed by him to the 1st petitioner on
March 3, 1959 and June 6, 1959.
This petition is resisted by respondent 1 on several
grounds. It is urged on its behalf that the levy
544
SUPREME COURT REPORTS
[1961]
196°
imposed by the impugned Act is a fee relatable to EnT
H"
.
tries 23 and 66 in List II and its validity is not affected
Ram;:, ";;';"c0 either by Entry 54 read with Act LIII of 1948 or by
Ltd. ~ 01:, .. "Entry 52 read with Act LXV of 1951. In the alternav.
·
tive It is contended fo;;t if the a;;,id levy is held to be
Th• s1a1e ?f
a tax and not a fee, it would be a tax relatable to
Orissa & Others Entry 50 in List II, and as such the legislative comG • d-dk 1 petence of the State Legislature to impose the same
a1en raga
ar .
b
f ll
h JI
d
.
cannot e success u y c a enge . Respondent 1 disputes the petitioner's contention that the impugned
Act is relatable to Entry 24 in List III; and so, according to it, no question of repugnancy with the Central
Act XXXII of 1947 arises.
After this appeal was fully argued before us Mr.
Amin suggested-and Mr. Sastri did not object-that
we should hear the learned Attorney-General on the
question as to whethe.r even if the levy imposed by the
impugned Act is a fee relatable to Entries 23 and 66
in List II of the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of
Entry 54 in List I read with Central Act LIII of 1948.
Accordingly we directed that a notice on this point
should be served on the learned Attorney-General and
the case should be set down for hearing on that point
again. For the learned Attorney-General the learned
Additional Solicitor-General appeared before us in
response to this notice and we have ha~ the benefit of
hearing his arguments on the point in question.
The first question which falls for consideration is
whether the levy imposed by the impugned Act amounts to a fee relatable to Entry 23 read with Entry 66
in List II. Before we deal with this question it is
necessary to consider the difference between the concept of tax and that of a fee. The neat and terse
definition of tax which has been given by Latham,
C. J., in Matthews v. Chicory Marketing Board(1) is
often cited as a classic on this subject. "A tax", said
Latham, C. J., "is a compulsory exaction of money by
public authority for public purposes enforceable by
law, and is not payment for services rendered". In
bringing out the essential features of a tax this defini-
(1) (1938) 6o C.L.R. 263, 276.
2 S.C.R. SUPREME COURT REPORTS
545
tion also assists in distinguishing a tax from a fee. It
1960
is true that between a tax and a fee there is no generic
. .
d·cc
B th
l
t'
f
The Hingirluerence.
o
are compu sory exac 10ns o money R
P
Co 1 c
by public authorities; but whereas a tax is imposed for a~d~~ ot:ers
0
"
public purposes and is not, and need not, be supported
v.
by any consideration of service rendered in r~turn, a
The State of
fee is levied essentially for services rendered and as _orissa & Othm
such there is an elenient of quid pro quo between the G . d-dk. 1
person who pays the fee and the public authority aJtn raga
ar
•
which imposes it. If specific services are rendered to
a specific area or to a specific class of persons or trade
or business in any local area, and as a condition precedent for the said services or in return for them cess
is levied against the said area or the said class of
persons or trade or business the cess is distinguishable
from a tax and is described as a fee.
Tax recovered
by' public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the consolidated. fund. It is earmarked and set apart for th-e purpose
of services for which it is levied. There is, however,
an element of compulsion in the imposition of both
tax and fee.
When the Legislature decides to render
a specific service to any area or to any.class of persons, it is not open to the said area or to the said class
of persons to plead that they do not want the service
and therefore they should be exell).pted from the payment of the cess. Though there is an element of quid
pro quo between the tax-payer and the public authority there is no option to the tax-payer in the matter
of receiving the service determined by public authority. In regard to fees there is, and must always be,
co-relation between the fee collected and the service
intended to be rendered. Cases may arise where under
the guise of levying a fee Legislature may attempt to
impose a tax; and in the case of such a colourable
exercise of legislative power courts would have to
scrutinise the scheme of the levy very carefully and
determine whether in fact there is a co-relation bet,
ween the service and the levy, or whether the levy is
either not co-related with service or is levied to such an
546
SUPREME COURT REPORTS
[1961]
i96o
excessive extent as to be a pretence of a fee and not a
Th H .
.
fee in reality. In other words, whether or not a partie
ingit'-
I
1 · d b
t
"
Rampu' coal co. cu ar cess evie
y a s atute amounts to a iee or tax
Ltd. o;. Others 'would always be a question of fact to be determined in
v.
the circumstances of each case. The distinction betThe State of
ween a tax and a fee is, however, important, and it is
Orissa & Othm recognised by the Qonstitution. Several Entries in the
Gajma,.gadka' 1. Three Lists empower the appropriate Legislatures to
levy taxes; but apart from the power to levy taxes
thus conferred each List specifically refers to the power
to levy fees in respect of any of the matters covered in
the said List excluding of course the fees taken in any
Court.
The question about the distinction between a tax
and a fee has been considered by this Court in three
decisions in 1954. In The Commissioner, Hindu Religious Endowments, Mailras v. Sri Lakshmindra Thirtha
Swamiar of Sri Shirur Mutt(') the vires of the Madras
Hindu Religious and Charitable Endowments Act,
1951 (Madras Act XIX of 1951), came to be examined.
Amongst the sections challenged was s. 76(1).
Under
this section every religious institution had to pay to
the Government annual contribution not exceeding
5% of its income for the services rendered to it by the
said Government; and the argument was that the contribution thus exacted was not a fee but a tax and as
such outside the competence of the State Legislature.
In dealing with this argument Mukherjee, J., as he
then was, cited the definition of tax given by Latham,
C.J., in the case of Matthews('), and has elaborately
considered the distinction between a tax and a fee.
The learned . judge examined the scheme of the Act
and observed that "the material fact which negatives
the theory of fees in the present case is that the
money raised by the levy of the contribution is not
earmarked or specified for defraying the expense that
the Government has to incur in performing the services.
All the collections go to the consolidated fund
of the State and all the expenses have to be met not
out of those collections but out of the general revenues
by a proper method of appropriation as is done in the
(t) [1954] S.C.R. 1005.
(2) (1938) 60 C.L.R. 263.
2 S.C.R. SUPREME COURT REPORTS
547
case of other Government expenses". The learned
r96o
judge no doubt added that the said circumstance was
Th H"
.
not conclusive and pointed out that in fact there was Ramp:, ~::~'~0.,
a total absence of any co-relation between the expenses
Ltd. c;. Others
incurred by the Government and the amount raised by
v.
contribution. That is whys. 76(1) was struck down
T.h• State of
as ultra vires.
Orissa s. Others
The same point arose before this Court in respect of Gajendragadkar J.
the Orissa Hindu Religious Endowments Act, 1939, as
amended by amending Act II of 1952 in Mahant Sri
Jagannath Ramanuj Das v. The State of Orissa (1).
Mukherjea, J.; who again spoke for the Court, upheld
the validity of s. 49 which impose¢!. the liability to pay
the specified contribution on every Mutt or temple
having an a~nual income exceeding Rs. 250 for services rendered by the State Government. The scheme
of the impugned Act was examined and it was noticed
that the collections made under it are not merged in
the general public revenue and are not appropriated
in the manner laid down for appropriation of expenses
for other public purposes. They go to constitute a fund
which is contemplated by s. 50 of the Act, and this
fund to which the Provincial Government contributes
both by way of loan and grant is specifically set apart
for the rendering of services involved in carrying out
the provisions of the Act. The same view was taken
by this Court in regard to s. 58 of the Bombay Public
Trust Act, 1950 (Act XXIX of 1950) which 'imposed a
similar contribution for a similar purpose in Ratilal
PanacharuL GaruLhi v. The State of Bombay (2). It would
thus be seen that the tests whfoh have to be applied
in determining the character of any impugned levy
have been laid down by this Court in these three decisions; and it is in the light of these tests that we have
to consider the merits of the rival contentions raised
before us in the present petition.
On behalf of the petitioners Mr. Amin has relied on
three other decisions which may be briefly considered.
In P. P. Kutti Keya v. TM State of Madras (8), the
Madras High Court was called upon to consider, inter
(1) [1954) S.C.R. 1046.
(2) [1954) S.C.R. 1055.
(S) A.I.R. 1954 Mad. 621,
\
548
SUPREME COURT REPORTS
[1961)
x96o
alia, the validity of s. 11 of the Madras Commercial
Th H'
.
Crops Markets Act 20 of 1933 and Rules 28(1) and 28(3)
Ramp:, i;:;;·Co., framed thereunder. Section 11(1) levied a fee on the
Ltd. & Othm sales of commercial crops within the notified area and
v.
s. 12 provided that the amounts collected by the Mar.
The State of
ket Committee shall be constituted into a Market
Orissa & Others Fund which would be utilised for acquiring a site for
Gajendragadkar J. the market, constructil}g a building, maintaining the
market and meeting the expenses of the Market Committee. The argument that these provisions amounted
to services rendered to the notified area and thus made
the levy a fee and not a tax was not accepted by the
Court. Venkatarama Aiyar, J., took the view that the
funds raised from the merchants for a construction of
a market in substance amounted to an exaction of a
tax. Whether or not the construction of a market
amounted to a service to the notified area it is unnecessary for us to consider. Besides, as we have already pointed out we have now three decisions of this
Court which have authoritatively dealt with this matter, and it is in the light of the said decisions that the
present question has to be considered.
In Attorney-General for British Columbia v. Esquimalt and Nanaimo Railway Go. (1), the Privy Council
had to deal with the validity of forest protection impost levied by the relevant section of the Forest Act
R. S. B. C. 1936. The lands in question were statu.
torily exempted from taxation, and it was urged
against the validity of the impost that the levy of the
said impost was not a service charge but a tax; and
since it contravened the exemption from taxation
granted to the land it was invalid. This plea was upheld by the Privy Council. The Privy Council did
consider two circumstances which were relevant; the
first that the levy was on a defined class of interested
individuals, and the second that the fund raised did
not fall into the general mass of the proceeds of taxation but was applicable for a special and· limited purpose. It was conceded that these consideratfons were
relevant but the Privy Council thought that the
weight to be attached to them should not be exagge-
(1) (1950) A.C. 87.
2 S.C.R. SUPREME COURT REPORTS
549
rated. In appreciating the weight of the said relevant
1960
circumstances the Privy Council was impressed by the
1.h
.
.
f:
h t th 1 d .
t"
£
d
.
e H1ngir·
act t a
e an s lll ques ion iorme an important Rampur Coal Co
part of the national wealth of the Province and their Ltd. W-Anothe• ·•
proper administration, including in particular protecv.
tion against fire, is a matter of high public_conci!'lrn as
~he State of
well as one of particular interest to individuals. In Onssa .s. Othm
other words, the effect of the impugned p_rovisio:i;i WaSGajendragadhar ].
that the expenses of what was the public serv10e of
the greatest importance for the Province as a whole
had been divided between the general body of taxpayers and those individuals who had a special interest in having their property protected. It would thus
appear that this decision proceeded on the basis that
what was claimed to be a special service to the lands ·
in question was in reality an item in public service
itself, and so the element of quid pro quo was absent.
It is true that when the Legislature levies a fee for rendering specific services to a specified ij.rea or to a specifi~
ed class of persons or trade or business, in the last analysis such services may indirectly form part of services to
the public in general. 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 whole may ultimately and indirectly be benefitted would not detract
from the character of the levy as a, fee. Where, how·
ever, the specific service is indistinguishable from public service, and in essence is directly a part of it, diffe~
rent considerations may arilile. In such a case it is
necessary to enquire what is the primary object of the
levy and the essential purpose which it is intended to
achieve. Its primary object and the essential purpose
must be distinguished from its ultimate or incidental
results or consequences. That is the true test in rletermining the character of the levy.
In Parton v. Mille Board (Victoria) (1), the validity
of the levy imposed on dairymen and owners of milk
depots bys. 30 of the Milk Board Act of 1933 as
amended by subsequent Acts of 1936-1939 wa.e
(I) (1949) So C.L.R. az9.
• 10
550
, SUPREME COURT REPORTS
[1961]
z96o
challenged, and it was held by Dixon, J., that the levy
of the said contribution a.mounted to the imposition of
Ra!;:~~:~~~o., a duty of excise. This decision was substantially based
Lid . .s. Others on the ground that the statutory boa.rd "performs no
v.
particular service for the dairyman or the owner of
Th• Slate of
a milk depot for which his contribution may be cono,issa .s. Others sidered as a fee or recompense"; that is to say the
G • d-dk 1 element of quid pro quo was absent qua the persons on
•J•n raga
ar ·whom the levy had been imposed. Therefore none of
the decisions on which Mr. Amin has relied can assist
his case.
Let us now examine the scheme of the impugned
Act. As the preamble shows it has been passed because
it was thought expedient to constitute mining areas
and a Mining Areas Development Fund in the State
of Orissa. It consists of 11 sections. Section 3 of the
Act provides for the constitution of a mining area
whenever it appears to the State Government that it
is necessary and expedient to provide amenities like
communications, water-supply and electricity for the
better development of any area in the State of Orissa.
wherein any mine is situated, or to provide for the
welfare of the residents or to workers in any such areas
within which persons employed in a mine or a. group
of mines reside or work. Under this section the State
Government has to define the limits of the area. and
is given the power to include within such area. any
local area. contiguous to the same or to exclude from
such area any local area. comprised therein; that is the
effect of s. 3(1). Section 3(2) empowers the owner or
a. lessee of a. mine or his duly constituted representative in the said area to file objections in respect of any
notification issued under s. 3(1) within the period specified, and the State Government is required to take
the said objection into consideration. After considering objections received the State Government is authorised to issue a notification constituting a mining area
under s. 3(3). Section 4 deals with the imposition and
collection of cess. The rate of the levy authorised
shall not exceed 5 per centum of the valuation of the
minerals at the pit's mouth. Section 5 provides for the
constitution of the Orissa Mining Areas Development
.I
I
•.
2 S.C.R. SUPREME COURT REPORTS
551
Fund. This fund vests in the State Government
z96o
a.nd ha.a to be ~ministered by such officer or ?fficers
The Hingira.s ma.y be a.ppomted by the State Government m that Rampur coal co.
behalf. Section 5(2) requires that t~ere shall be pa.id
Lttl • .s. 011t#r1 '
to the credit of the· said fund the proceeds of th.e cess
v.
recovered under s. 4 for ea.ch mining area. during the
T_he State of
quarter after deducting expenses, if any, for collectiqn Orissa .s. Otlim
and recovery. Section 5(3) contemplates tha.t to theGajentlragailllar 1.
credit of the said fund shall be pla.ced all collections of
ceBB under s. 5(2) as well as a.mounts from State Go~
vernment and the local authorities and public subscriptions specifically given for any of the purposes of Lhe
fund. Section 5(4) deals with the topic of the a.pplica.tion of the said fund. The fund has to be utilised
to meet expenditure incurred in connection with such
measures which in the opinion of the State Government a.re necessary or expedient for providing amenities like communications, water supply and electricity,
for the better development of the mining areas, and to
meet the welfare of the la.hour and other persons residing or working in the mining areas. Section 5(5) lays
down that without prejudice to the generality of the
foregoing provisions the fund may be utilised to defray any of the purposes specified in els. (a) to (e). Under s. 5(6) the State Government is given the power to
decide whether any particular expenditure is or is not
debitable to the fund and their decisjon is ma.de final;
and s. 5(7) imposes on the State Govemm~nt an obligation to publish annually in the gazette a report of
the activities fin11inced from the fund together with an
estimate of receipts a.nd expenditure of the fund a.nd
a statement of account. Section 6 prescribes the mode
of constituting a.n advisory committee. It has to consist of such number of members and .chosen in such
manner as ma.y be prescribed, provided however that
ea.ch committee shall include representatives of mineowners a.nd workmen employed in mining industry.
The names of ·the members of the committee a.re
required to be published in the gazette. Section 7
dea~ with the appointment and functions of .the· s~tu-
·. tory authorities to carry out the purpose of the Ao~
while ·s. 8 confot.s on the State· Gove:tnm~nt power to
552
SUPREME COURT REPORTS
[1961]
r96o
make rules. Section 9 prescribes penalties and proT
.
.
vides for prosecutions; and s. 10 gives protection to the
he H1ng11·
•fi d
th •t•
ffi
.
t f
h.
Ramp
co 1 c spe01 e au on ies or o cers m respec o a.nyt mg
Ltd~~ 01:.,,°" done or intended to be done by them in good faith in
v.
pursuance of the Act or any rules or order ma.de
Th• SW• of
thereunder. Section 11, which is the last section, conOrissa .s. Olhm fers on the State Government the power to do any.
G . ,-dk 1 thing which may appear to them to be necessary for
41'" rag• ar ·the purpose of removing difficulties in giving effect to
the provisions of the Act.
The scheme of the Act thus clearly shows that it
has been passed for the purpose of the development
of mining areas in the State. The basis for the operation of the Act is the constitution of a. mining area.,
and it is in regard to mining areas thus constituted
that the provisions of the Act come into play. It is
not difficult to appreciate the intention of the State
Legislature evidenced by this Act. Orissa is an underdeveloped State in the Union of India. though it has
a lot of mineral wealth of great potential value. Unfortunately its mineral wealth is located generally in
areas sparsely populated with bad communications.
Inevitably the exploitation of the minerals is handicapped by lack of communications, and the difficulty
experienced in keeping the labour force sufficiently
healthy and in congenial surroundings. The mineral
development of the State, therefore, requires that provision should be ma.de for improving the communications by constructing good roads and by providing
means of transport such as tramways; supply of water
and electricity would also help. It would also be
necessary to provide for amenities of saruta.tion and
education to the labour force in order to attract workmen to the area.. Before the Act was passed it appears
that the mine-owners tried to put up small-length
roads and tramways for their own individual purpose,
but that obviously could not be as effective as roads
constructed by the State and tramway service provided by it. It is on a. consideration of these factors
that the State Legislature decided to take an active
pa.rt in unsystematic development of its mineral areas
which would help the mine-owners in moving their
2 S.C.R. SUPREME COURT REPORTS
553
minerals quickly through the shortest route and
z960
would attract labour to assist the excavation of the
n
H"
.
minerals. Thus there can be no doubt that the pri- R ;e
;;c·;~
mary and the principal object of the Act is to develop a':id~~ 0~=ers
0
'
the mineral areas in the State and to assist more
v.
efficient and extended exploitation of its mineral
Tha Stata of
wealth.
.
.
Orissa & Others
The constitution of the advisory committee as pres- G . d-dk 1
cribed by s. 4 emphasises the fact that the policy of a;en raga
ar •
the Act would be to carry out with the assistanee of
the mine-owners and their workmen. Thus after a
mining area is notified an advisory committee is constituted ~n respect of it, and the task of carrying out
the objects of the Act is left to the care of the said
advisory committee subject to the provisions of the
Act. Even before an area is notified the mine-owners
are allowed an opportunity to put forward their objections.