# THE SECRETARY TO GOVERNMENT OF MADRAS AND ANR v. P.R. SRIRAMULU AND ANR

- **Citation:** [1995] Supp. 5 S.C.R. 551
- **Court:** Supreme Court of India
- **Decided:** 1995-11-22
- **Case number:** CIVIL APPEAL NO. 736 D OF 1975
- **Bench:** S.P. Bharucha, Faizan Uddin, S.B. Matmudar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-secretary-to-government-of-madras-and-anr-v-p-r-sriramulu-and-anr-13378
- **Pages:** 21

## Headnote

Tamil Nadu Cowt Fees and Suit Valuation Act, 1955-Levy of Court
fee on ad-valorem scale without upper limit-Validity-Essential characters
of fee-Feasibility of a fixed maximum chargeable fe~eed for unifonnity
in scales of Court fees through country-Economic and social policy of C
State-Court's power to inteifere.
The respondents No. 1 and 2 challenged the validity of the provisions
of levy of Court Fees and Suit Valuation Act of 1955 with reference to levy
of Court Fees ad-valorem working out at the rate of 7 1/2 percent without D
upper limit by contending that the levy was not only exorbitant but wholly
arbitrary, unreasonable and unjustified bearing no relationship to the cost
of administration of justice; that it was not a levy of Court fee but really
a levy of tax though purporting to be a levy of fee; that the Court fees must
be related to the cost of administration of justice and cannot be used as a
means of taxation for the purpose of raising the revenue to the Government for its general administration; that the pattern of levy of Court fees
prior to 1955 was only to levy an ad-valorem fee up to a certain limit and
thereafter the fee was on a reduced scale and that the scale of fees in other
States of the country are also on different basis and not on the basis of
E
ad-valorem fee without limit.
F
The High Court allowed the writ petitions and appeal and struck
down Article (1) in Schedule (1) to the Tamil Nadu Court Fees and Suits
Valuation Act, 1955 and Sub-rule (1) of Rule (1) of Order II of the High
Court Fees Rules 1956 based on Article (1) of Schedule (1) of Madras Act
No. XIV of 1955, and held them to be invalid in so-far-as they relate to the G
levy of Court Fees on ad-valorem scale. The High Court held that the levy
of ad-valorem flat rate of 7 1/2 percent without any upper limit would be
unreasonable because where the cost of service had to be distributed
between several persons, it would not be equitable and reasonable if the
fees were so fixed that the whole costs or a grossly disproportionate part H
551
552
SUPREME COURT REPORTS. [1995] SUPP. 5 S.C.R.
A
of it was imposed on a particular section of litigants.
B
In appeal, this Court set aside the judgment of the High Court and
remitted the matter back to the High Court considering that the appeal
could not be disposed of without giving opportunity to the respondent to
file an affidavit or affidavits in reply to the supplemental counter affidavit.
After remand, the High Court while striking down the provisions held that
there was no idea of quid pro quo in the levy at the rate of 7 1/2 percent
flat rate without limit as there was no necessity to raise the Court Fees as
compensation for the cost of service rendered and to meet any increased
cost in the administration of civil justice and there was no principle of
C rationalisation justifying demand at a fixed rate; that considering the
circumstances the impost inherently bears within it more the concept of
tax than fee and the levy imposing, as it does, on a particular section of
litigants is grossly dis- proportionate to the burden and the same is
unreasonable and arbitrary; that the expenditure incurred by the Government could not be debited to the cost of administration of justice which
D the litigants can be required to compensate and that the expenditure in
the administration of Criminal Justice is also not debitable to the cost of
administration of Civil Justice in Court and that the record indicated that
for the year 1955-56 the State was making a profit varying between 9 to 21
lakhs. This appeal had been filed against the judgment of the High Court.
E
F
G
The questions raised for consideration were : (i) what is the nature
of the Fees taken in Court within the meaning of Entry 3, List II, in 7th
Schedule of the Constitution; (ii) Whether it is a colourable exercise of
legislative power, in as much as the State in fact is raising tax under the
guise of levying a fee because the levy is excessive to such

## Text

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...
THE SECRETARY TO GOVERNMENT OF MADRAS AND ANR.
A
v.
P.R. SRIRAMULU AND ANR.
NOVEMBER 22, 1995
B
[S.P. BHARUCHA, FAIZAN UDDIN AND S.B. MATMUDAR, JJ.]
Tamil Nadu Cowt Fees and Suit Valuation Act, 1955-Levy of Court
fee on ad-valorem scale without upper limit-Validity-Essential characters
of fee-Feasibility of a fixed maximum chargeable fe~eed for unifonnity
in scales of Court fees through country-Economic and social policy of C
State-Court's power to inteifere.
The respondents No. 1 and 2 challenged the validity of the provisions
of levy of Court Fees and Suit Valuation Act of 1955 with reference to levy
of Court Fees ad-valorem working out at the rate of 7 1/2 percent without D
upper limit by contending that the levy was not only exorbitant but wholly
arbitrary, unreasonable and unjustified bearing no relationship to the cost
of administration of justice; that it was not a levy of Court fee but really
a levy of tax though purporting to be a levy of fee; that the Court fees must
be related to the cost of administration of justice and cannot be used as a
means of taxation for the purpose of raising the revenue to the Government for its general administration; that the pattern of levy of Court fees
prior to 1955 was only to levy an ad-valorem fee up to a certain limit and
thereafter the fee was on a reduced scale and that the scale of fees in other
States of the country are also on different basis and not on the basis of
E
ad-valorem fee without limit.
F
The High Court allowed the writ petitions and appeal and struck
down Article (1) in Schedule (1) to the Tamil Nadu Court Fees and Suits
Valuation Act, 1955 and Sub-rule (1) of Rule (1) of Order II of the High
Court Fees Rules 1956 based on Article (1) of Schedule (1) of Madras Act
No. XIV of 1955, and held them to be invalid in so-far-as they relate to the G
levy of Court Fees on ad-valorem scale. The High Court held that the levy
of ad-valorem flat rate of 7 1/2 percent without any upper limit would be
unreasonable because where the cost of service had to be distributed
between several persons, it would not be equitable and reasonable if the
fees were so fixed that the whole costs or a grossly disproportionate part H
551
552
SUPREME COURT REPORTS. [1995] SUPP. 5 S.C.R.
A
of it was imposed on a particular section of litigants.
B
In appeal, this Court set aside the judgment of the High Court and
remitted the matter back to the High Court considering that the appeal
could not be disposed of without giving opportunity to the respondent to
file an affidavit or affidavits in reply to the supplemental counter affidavit.
After remand, the High Court while striking down the provisions held that
there was no idea of quid pro quo in the levy at the rate of 7 1/2 percent
flat rate without limit as there was no necessity to raise the Court Fees as
compensation for the cost of service rendered and to meet any increased
cost in the administration of civil justice and there was no principle of
C rationalisation justifying demand at a fixed rate; that considering the
circumstances the impost inherently bears within it more the concept of
tax than fee and the levy imposing, as it does, on a particular section of
litigants is grossly dis- proportionate to the burden and the same is
unreasonable and arbitrary; that the expenditure incurred by the Government could not be debited to the cost of administration of justice which
D the litigants can be required to compensate and that the expenditure in
the administration of Criminal Justice is also not debitable to the cost of
administration of Civil Justice in Court and that the record indicated that
for the year 1955-56 the State was making a profit varying between 9 to 21
lakhs. This appeal had been filed against the judgment of the High Court.
E
F
G
The questions raised for consideration were : (i) what is the nature
of the Fees taken in Court within the meaning of Entry 3, List II, in 7th
Schedule of the Constitution; (ii) Whether it is a colourable exercise of
legislative power, in as much as the State in fact is raising tax under the
guise of levying a fee because the levy is excessive to such an extent as to
be a pretence of a fee but it is not a fee in reality? (iii) whether the levy of
Court Fees on ad valorem basis without an upper limit renders the impost
a tax; (iv) Whether the impugned impositions are fees.
Allowing the appeal, this Court
HELD : 1.1. If the essential character of the levy is that some social
service is intented a quid pro quo to the class of citizens which is intended
to be b~11efited by the service and a board and general correlation between
the amount so collected and the expenses incurred in providing the services is found to exist, then such levy would partake the character of a "fee",
H irrespective of the fact that such special services for which the amount by
SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU
553
levy of fee is collected incidentally and indirectly benefit the general public A
also. In order to establish the correlation between the amount recovered
by way of "fee" and the expenses incurred in providing the service they
should not be examined so minutely or be weighed in golden scale to
discern any difference between the two. It is not necessary to ascertain the
same with any mathematical exactitude for finding the correlation but the
test would be satisfied if a broad and general correlation is found to exist
and once such a broad correlation between the totality of the expenses on
the services rendered as a whole, on the one hand and the totality of the
amount so raised by way of the fee, on the other is established, it would be
no part of the legitimate exercise in the examination of the constitutionality
of the concept of the impost to emark upon its effect in the individual cases.
B
c
If the aforesaid relation is found to exist in the levy of the fee, the levy
cannot be said to be wanting in its essential character of a fee on the
ground that the measure of its distribution on the persons or incidence is
disproportionate to the actual services made available to them. The correlation is not in the context of individual contributors, the test being its D
ascertainment on a comprehensive basis keeping in view the va!ue of the
totality of the service, qua, the totality of receipts. [566-A-G]
1.2. The State employs the widest latitude where measure of
economic regulations are concerned. These measures for fiscal and
economic regulation involve an evaluation of diverse and quite often
conflicting economic criteria, adjustment and balancing of various conflicting social and economic values and interests. It is for the State to
decide what economic and social policy it should pursue. It is settled law
that in view of the inherent complexity of the fiscal adjustment, the Courts
E
give a large discretion to the legislature in the matter of as preferences of F
economic and social policies and effectuate the chosen system in all
possible and reasonable ways. If two or more methods of adjustment of an
economic measure are available, the legislative, preference in favour of one
of them cannot be questioned on the ground of lack of legislative wisdom
or that the method adopted is not the best or there are better ways of G
adjusting the competing interests and the claims as the legislature possesses the greatest freedom in such area. Lack of perfection in a legislative
measure does not necessarily imply its constitutionality as no economic_
measure has so far been discovered which is free from all discriminatory
impacts and that in such a complex area in which no full proof device
exists, the Court should be slow in imposing strict and rigorous standard H
554
SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.
A of scrutiny by reason of which all local fiscal schemes may be subjected to
criticism under Equal protection clause. (567-A-E]
B
Govt. of Madras v. Zenith Lamps, AIR (1973) SC 724; Om Prakash v.
Gili Raj Kishori, AIR (1986) SC 726 and P.M. Ashwanatha Narayana Setty
v. State of Kamataka, [1989] Suppl. 1 SCC 696, relied on.
13. There could not be any scientific method by which the levy of fee
may be made exactly corresponding to the expenditure in a particular year
relating to the administration of civil justice. Some fluctuations are bound
to occur in respect of the recoveries by levy of fee and the expenditure on
C administration of civil justice. It is also not the requirement of law that the
collection raised through the levy should exactly tally or correspond to the
expenditure in the administration of civil justice. The co-relation between
the amount raised through the fee and the expenses incurred in providing
the services should not be examined with exactitude with a view to ascertain
any accurate and arithmetical equivalence but the test would be satisfied if
D a broad and general correlation is found to exist. Even if the recoveries
during the period from 1955-65 were in excess to the tune of about Rs. 9 to
21 lacs per year, the levy would not fail on that account because once it is
established that the primary and essential purpose is the rendering of
specific services to a specified class, it becomes immaterial that the State
E has earned certain benefits out of it indirectly. [568-B-E]
1.4. It is difficult to find any proper basis or formula to separate the
charges of civil and criminal administration of justice when civil and
criminal Courts are generally not distinct but both functions are discharged by the same Judicial Officer. It is not only difficult rather imposF
sible to ascertain as to how much public time was spent by a Judicial
Officer while dealing with criminal matters and how much time was spent
while dealing with civil matters so as to come to a definite conclusion that
any surplus much less sizeable surplus is left out of the receipts derived
from Court Fees after meeting the actual expenditure in administration of
G civil justice. (568-G-H; 569-A)
1.5. Having regard to the changing social and economic conditions
of the country and the threats of frequent inflationary trends hovering
around, the levy of Court Fees cannot remain static and has to be amended
according to the requirements of the times. The increase in the Court Fees
H has to be appreciated having regard to the increased need of the revenue
SECRY. TO oovr. OFMADRASv. P.R SRIRAMULU [FAIZANUDDIN,J.) 555
by reason of the increased cost of the administration of justice. [569-C-D]
1.6. The administration of justice is a service which the State is
under an obligation to render to its subject. The amount raised from the
suitors by way of fee should not normally exceed the cost of the administration of justice because, possibly there could be no justification with the
State to enrich itself from High Court fees or to secure revenue for general
administration. The total receipts from the Court Fees should be such as
by and large can cover the cost of administration of justice. There should
also be some measure of uniformity in the scales of Court Fees throughout
A
B
the country as there appears to be a vast difference in the scales of Court
Fees in various States of the country. The feasibility of a fixed maximum . C
chargeable fee also deserves serious consideration. [570-G-H; 571-A]
All India Judges Association v. Union of India, [1992) 1 SCC 119,
relied on.
CIVIL APPELLATE JURISDICTION : CIVIL APPEAL NO. 736 D
OF 1975.
Certificate from the Judgment and dated 3.3.75 of the Madras High
Court in W.P. No. 749 of 1966.
With
Writ Petition No. 1390 of 1987.
(Under Article 32 of the Constitution of India.)
E
A.K. Ganguli, Rajesh Mahale and P. Mahale for the Appellant &
F
Respondent in C.A. No. 736/75 & W.P. No. 1390/87.
A.T.M. Sampath for the Respondent in C.A. No. 736/75.
G.L. Sanghi, O.C. Mathur and Mrs. Meera Mathur for JBD & Co.
for the Petitioner in W.P. No. 1390/87.
G
The Judgment of the Court was delivered by
FAIZAN UDDIN, J. 1. The appeal by certificate granted by the High
Court fl.as been directed against the Judgment dated, March 3, 1975
delivered by the High Court of Madras in Writ Petition No. 749/1966 P.R. H
556
SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.
....
A Sriramulu & Anr. v. The Secretary to the Govemment of Madras. Home
Department alongwith a group of other Writ Petitions and Civil Appeals,
declaring Article (1) in Schedule (1) to the Tamilnadu Court Fees and
Suits Valuation Act, 1955 and Sub-rule (1) of Rule (1) of Order II of the
..
High Court Fees Rules. 1956 based on Article (1) of Schedule (1) of
B Madras Act No. XIV of 1955, to the invalid in so-far-as they relate to the
levy of Court Fees on ad-valorem scale.
2. The facts in brief leading to the aforesaid appeal are that certain
lands belonging to the respondents No. 1 and 2 herein situated in Tondiarpet were acquired at the instance of Public Works Department in respect
c of which award No. 6 and 8 both of 1962 were made on 5.3-.1962 and
10.3.1962. On a reference made under Section 18 of the Land Requisition
Act, at the instance of respondents No. 1 and 2, IVth Assistant City Civil
Judge, Madras enhanced the compensation. The respondents being dissatisfied preferred appeals to the High Court for further enhancement of
D the compensation. The Court Fee payable according to Madras Court Fees
and Suits Valuation Act, 1955 on such appeals was an ,ad-valorem Court
Fee at the rate of 7 1/2 per cent of the total claim without any upper limit
for such levy irrespective of the amount. The respondents No. 1 and 2
'•
challenged the validity of the aforesaid provisions of levy of Court Fees and
Suits Valuation Act of 1955 with reference to levy of Court Fees adE
valorem working out at the rate of 7 1/2 per cent without upper limit by
contending that the levy is not only exorbitant but wholly arbitrary, unreasonable and unjustified bearing no re1ationship to the cost of administration of justice and that in fact it was not a levy of Court Fee but
really a levy of tax though purporting to be a levy of fee. The respondents
F
took the stand that the Court Fees must be related to the cost of administration of justice and cannot be used as a means of taxation for the
purpose of ·raising the revenue to the Government for its general administration. Respondents further took the stand that the pattern of levy
of Court Fees prior to 1955 was only to levy an ad-valorem fee up to a
certain limit and thereafter the fee was on a reduced scale and that the
G scale of fees in other States of the country are also on different basis and
not on the basis of ad-valorem fee without limit. The said provisions
therefore, were sought to be declared invalid.
-
3. One Mr. Kelu Eradi, Joint Secretary to the Government of Tamil
H Nadu had filed the counter affidavit on behalf of the State supporting the
SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU [FAIZANUDDIN,J.J 557
levy of ad-valorem Court Fees and opposing the writ petitions. However, A
at the arguments stage one Mr. J. Shiva Kumar, Deputy Secretary to the
Government also filed a supplementory counter affidavit dated 11.10.1966
on behalf of the Government but the High Court did not take into account
the said supplementory counter affidavit and decided with petitions. Relying on the principles laid down in C01poration of Madras v. Spencer & Co.
the High Court allowed the group of writ petitions and appeal and struck
down the afore-mentioned provisions by taking the view that the levy of
ad-valorem flat rate of 7 1/2 per cent without any uper limit would be
unreasonable, because where the cost of service had to be distributed
between several persons, it would not be equitable and reasonable if the
B
fees were so fixed that the whole cost or a grossly dis-proportionate part C
of it was imposed on a particular section of litigants. The said judgment
was challenged before this Court in appeal. This Court allowed the appeal
and set aside the judgment of the High Court and remitted the matter back
to the High Court with the following observations;
"It seems to us that we cannot dispose of this appeal without giving D
opportunity to the respondents to file an affidavit or affidavits in
reply to the supplemental counter affidavit dated October 11, 1966
because if we take the figures as given and explained by the
Advocate-General we cannot say that the State is making a profit
out of the administration of civil justice. Various items both on the E
receipt side and the expenditure side have to be carefully analysed
to see what items or portion of items should be credited or debited
to the administration of civil justice;
It is true, as held by the High Court, that it is for the State to
establish that what has been levied is Court fee properly so called
and if there is any enhancement the State must justify the enhancement;
We are accordingly constrained to allow the appeal and set aside
the judgment passed by the High Court and remit the case to it;
We direct that the High Court should give an oppQrtunity to the
writ petitioners to file an affidavit or affidavits in reply to the
affidavit dated October 11, 1996. The High Court shall then decide
whether the in_pugncd fees are the Court fees or taxes on litigants
or litigation."
F
G
H
A
B
558
SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.
4. After remand by this Court the respondents filed further affidavits
traversing the supplemental counter affidavit dated October 11, 1966 filed
by Mr. Shiv kumar on behalf of the Government. After considering the
affidavits filed on behalf of the parties and the material on record the High
Court took the view in the impugned judgment that there is no idea of quid
pro quo in the levy at the rate of 7 1/2 per cent flat rate without limit as
there is no necessity to raise the Court fees as compensation for the cost
of service rendered and to meet any increased cost in the administration
of civil justice and that there was no principle of rationalisation justifying
demand at a flat rate. The High Court further held that considering the
circumstances the impost inherently bears within more the concept of tax
C than fee and the levy imposing, as it does, on a particular section of litigants
is grossly dis-proportionate part of the burden and the same is unreasonable and arbitrary. The expenditure incurred by the Government as
shown in some of the items, in the opinion of the High Court could not be
debited to the cost of administration of justice which the litigant can be
D required to compensate and that the expenditure in the administration of
criminal justice is also not debitable to the cost of administration of civil
justice in Courts. The High Court further held that the record indicated
that for the year 1955-56 the State was making a profit varying between 9
to 21 lakhs. On the basis of these conclusions the High Court struck down
Article 1 in Schedule 1 to the Tamilnadu Court Fees and Suits Valuation
E Act and Sub-rule 1 of Rule 1 of the High Court Rules, 1956 based on
Article 1 of Schedule 1 to the Madras Act No. 14 of 1955 as invalid against
which the aforementioned appeal has been directed.
5. The petitioner in writ petition No. 139/1987 is a Bank. The said
p
Bank had filed a civil suit for recovery of Rs. 6,50,40,605.12 against M/s.
Mettur Textile Industries Ltd. and Others on which it had to pay Court
Fee amounting to Rs. 48,78,054.25 on ad-valorem basis at the rate of 7 1/2
per cent under Article 1 of Schedule 1 of the said Madras Act No. XIV
of 1955. Certain other money suits were also contemplated by the Bank
and having learnt that the Civil Appeal No. 736/1975 has been filed in this
G Court against the Madras judgment, the Bank has also filed the aforesaid
writ petition under Article 32 of the Constitution of India challenging the
said levy of Court Fees on the flat rate of 7 1/2 percent ad-valorem, relying
on the same grounds as are set out in the aforesaid appeal.
H
6. Before we embark upon the points in controversy and respective
..
SECRY. TOGOVf. OFMADRASv. P.R.SRIRAMULU[FAIZANUDDIN,J.) 559
contentions relating thereto we may briefly trace the history with regard to A
the levy of Courts Fee in this country on the litigating parties. Before the
advent of British rule in India the administration of justice was considered
to be the basis function of the State as guardian of the people without the
levy of any charge on the party approaching the Court for redress of its
grievance. As far as the memory goes during the Moghul rule and the B
period prior to that, there was no fee payable even on administration of
Civil Justice and the administration of justice was totally free. It was only
after the British rule that regulations imposing Court Fees were brought
into existence. In the beginning the imposition of the fee was nominal but
in the course of time it was enhanced gradually under the impression that
it would prevent the institution of frivolous and groundless litigation and C
as an effective deterrent to the abuse of process of the Court without
causing any impediment in the institution of just claims. However insignificant this view may be that the levy of fees would have a tendency to put
a restraint on frivolous litigation that view at any rate had the merit of
seeking to achieve a purpose which was believed to have some relevance D
to the administration of justice. Since about past two decades the levy of
Court Fees on higher scales would seem to find its justification, not in any
purpose related to the sound administration of justice, but in the need of
the State Government for revenue as a means for recompense. It may be
seen that the Central Court Fees Act of 1870 fixed, what may be described
in view of subsequent happenings, a moderate scale of Court Fees. But the E
fact may not be lost sight of that after the enactment of the Court Fees
Act, 1870 the financial needs of the State Governments have multiplied t.o
a much larger extent. Consequently most of the States have enacted their
own Court Fees Acts or have amended the original Acts themself beyond
recognition and thereby have increased the scale of fees to a level which F
has given rise to the feeling that it is no longer a fee but a heavy tax on the
litigants.
7. It cannot be disputed that the administration of justice is one of
the main functions of the State. It is also a fact that the functions .of the G
State in the modern times have become too extensive encompassing a,,J.arge
area of activity. Now the State has not only to maintain system of administration of justice for the maintenance of law and order, but it has also
to provide a system to enable its citizens to convass their rights against
wrongs done to them as well as to the State itself, statutory bodies and
Government Corporations, they being now the largest litigants by reason H
560
SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.
A of the growing tendency of all the States to project themselves into various
social, economic and industrial spheres of the society, which during preindependence days, was a rare phenomena. It is for all these reasons that
the States came forward to levy fee by legislative amendments in order to
cover up the expenses towards the pay, allowances and pensions of judicial
B Officers and establishment staff, their residential accommodations. Court
buildings repairs and maintenance thereof as well as provision for
transport, libraries and stationery, besides other expenses under various
heads and machinery engaged and employed for the administration of
justice.
C
8. In the present appeal and writ petition before us, it may be noted
that the questions that arise out of the arguments addressed to us by the
learned counsel for the parties, may be formulated as under :
(1) What is the nature of the Fees taken in Court within the meaning
of Entry 3, List II, in 7th Schedule of the Constitution. Whether the fee so
D charged is a tax or a fee?
(2) Whether it is a colourable exercise of legislative power, in as
much as the State in fact is raising tax under the guise of levying a fee
because the levy is excessive to such an extent as to be a pretence of a fee
E but it is not a fee in reality?
(3) Whether they levy of Court Fees on ad-valorem basis, without an
upper limit renders the impost a tax in as-much-as, having regard to the
very nature of services, which consist of adjudication of disputes, a_ stage
is inevitably reached wherein after and above an ad-vqlorem levy, the
F
proportionate increase in the value of the subject matter ceases to be a fee
and becomes a tax?
( 4) Whether the impugned impositions are fees - there being no
correlation between the services and the levy and because State makes a ·
G profit out of the administration of civil justice as it does not spend the
entire money on administration of civil justice but also in administration of
criminal justice and a large surplus is left out even after meeting the
expenses of the administration of Justice?
9. We may state here that the aforementioned questions raised before
H us are not new but were raised and agitated earlier also and decided by
SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU (FAIZAN UDDIN, J.) 561
this Court. In this connection a reference to some of the decisions may be A
made. In J.M. & M. Industries v. State of Bihar, AIR 1971 SC 1182 this Court
expressed the view that before any levy can be upheld as a fee, it must be
shown that the levy has reasonable correlation with the services rendered
by the Government. In other words the levy must be proved to have a quid
pro quo for the services rendered. But in such matters it will be impossible
to have an exact correlationship and that the correlationship expected to
exist is one of a general character and not of arithmetical exactitude. It has
been further observed that the correlationship between the services
rendered and the levy of fee is essentially a question of fact.
B
10. A Constitution Bench of this Court while enterpreting Entry 3, C
List II in Schedule 7 of the Constitution of India, in the case of Govemment
of Madras v. Zenith Lamps, AIR 1973 SC 724 took the view that the fees
taken in Courts cannot be equated with taxes and in paragraph 31 of the
report held as under :
"In this case we are concerned with the administration of civil D
justice in a State. The fees must have relation to the administration
of civil justice. While levying fees the appropriate legislature is
competent to take into account all relevant factors, the value of
· the subject matter of the dispute, the various steps necessary in
the prosecution of a suit or matter, the entire cost of the upkeep
of Courts and officers administering civil justice, the vexatious
nature of a certain type of litigation and other relevant matters. It
is free to levy a small fee in some cases, a large fee in others,
subject of course to the provisions of Art. 14. But one thing the
Legislature is not competent to do, and that is to make litigants
contribute to the increase of general public revenue. In other
words, it cannot tax litigation, and make litigations pay, say for
road building or education or other beneficial scheme that a Slate
may have. There must be a broad correlationship with the fees
collected and the cost of administration of civil justice."
Further in the said report this Court also agreed with the following observations made in ILR (1968) 1 Madras 247 at pp. 340-341 :
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"When a levy is impugned as a colourable exercise of legislative
power, the State being charge with raising a tax under the guise of
levying a fee, courts have to scrutinize the scheme of the levy H
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carefully, and determine whether, in fact there is correlation between the services and the levy, or whether the levy is excessive to
such an extent as to be a pretence of a fee and not a fee in reality.
If, in substance, the levy is not to raise revenues also for the general
purposes of the State the mere absence of uniformity or the fact
that it has no direct relation to the actual services rendered by the
authority to each individual who obtains the benefit of the service,
or that some of the contributories do not obtain the same degree
of service as others may, will not change the essential character of
the levy."
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11. Again in Om Prakash v. Gbi Raj Kishori AIR 1986 SC 726 this
Court observed in para 10 of the report that in determining a levy as fee
the true test must be whether its primary and essential purpose is the
rendering of specific services to a specified area or class, it being of no
consequence that the State may ultimately and indirectly be benefitted by
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12. Apart from the aforementioned decisions the points in controversy and questions raised before us, as referred to above, are squarely
covered by a decision of this Court in P.M. Ashwanatha Narayana Setty v.
State of Kamataka, [1989] Supplt. 1 SCC 696. While dealing with the
distinction between a "free" and a "tax" and after reviewing all the earlier
pronouncements of this Court on the conceptual distinction between a fee
and a tax, it has been observed in para 35 (page 712 of the report as under:
"What emerges from these pronouncements is that if the essential
character of the impost is that some special service is intended or
envisaged as a quid pro quo to the class of citizens which is intended
to be benefitted by the service and there is a broad and general
correlation between the amount so raised and the expenses involved in providing the services, the impost would partake the
character of a "fee" notwithstanding the circumstance that the
identity of the amount so raised is not always kept distinguished
but is merged in the general revenues of the State and notwithstanding the fact that such special services, for which the
amount is raised, are, as they very often do, incidentally or indirectly benefit the general public also. The test is the primary object of
the levy and the essential purpose it is intended to achieve. The
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SECRY. TO GOVT. OFMADRASv. P.R.SRIRAMULU [FAIZANUDDIN,J.] 563
correlationship between the amount raised through the 'fee' and A
the expenses involved in providing the services need not be examined with a view to ascertaining any accurate, arithmetical
equivalence or precision in the correlation; but it would be sufficient that there is a broad and general correlation."
In para 66 of the said report while repelling the a_rgurnents with regard to
the alleged arbitrariness and inequities in the imposition of the ad-valorem
impost without an under limit this Court in paragraph 67 (page 720) of the
report observed as follows :
"The anomalies that the policy behind the impugned provisions can
produce in conceivable cases could, indeed, be inquitable or even
quite startling. But the argument in the last analysis becomes
indistinguishable from the contention that the correlation of the
services to the fee would have to be decided on the basis of how
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the correlation operate in each individual case. It would be an
insistence on testing the conceptual nature of the fee on the basis D
of the degree of the quid pro quo in the case of each individual
payer of the fee. That is the peccant part of the argument. Once
a broad correlation between the totality of the expenses on the
services, conceived as a whole, on the one hand and the totality of
the funds raised by way of the fee, on the other, is established, it E
would be no part of the legitimate exercise in the examination of
the constitutionality of the concept of the impost to embark upon
its effect in individual cases. Such a grievance would be one of
disproportibnate nature of the distribution of the fees amongst
those liable to contribute and not one touching the conceptual
nature of the fee."
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It has been further observed in para 72(page 721) of the said report as
under:
"What emerges from the foregoing discussion is that when a broad G
and general correlation between the totality of the fee on the one
hand and the totality of the expenses of the services on the other
is established, the levy will not fail in its essential character of a
fee on the ground alone that the measure of its distribution on the
persons or incidence is disproportionate to the actual services
·obtainable by them. The argument that where the levy, in an H
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individual case, far exceeds the maximum value, in terms of money,
of the services that could at all be possible, then, qua, that contributor, the correlation breaks down is a subtle and attractive
argument. However, on a proper compensation of the true concept
of a fee the argument seems to us to be more subtle then accurate.
The test of the correlation is not in the context of individual
contributors. The test is on the comprehensive level of the value
of the totality of the services, set off against the totality of the
receipts. If the character of the 'fee' is thus established, the vagaries
in its distribution amongst the class; do not detract from the
concept of a 'fee' as such, though a wholly arbitrary distribution
of the burden might violate other constitutional limitation."
In this connection it will also be appropriate to have a look at the observations made in para 79 (at page 723) of the said report which are as
follows:
"The problem is, indeed, a complex one not free from its own
peculiar difficulties. Though other legislative measures dealing
with economic regulation are not outside Article 14, it is well
recognised that the State enjoys the widest latitude where measures
of economic regulation are concerned. These measures for fiscal _
and economic regulation involve an evaluation of diverse and quite
often conflicting economic criteria and adjustment and balancing
of various conflicting social and economic values and interests. It
is for the State to decide what economic and social policy it should
pursue and what discriminations advance those social and
economic policies. In view of the inherent complexity of these fiscal
adjustments Courts give a larger discretion to the legislature in the
matter of its preferences of economic and social policies and
effectuate the chosen system in all possible and reasonable ways.
If two or more methods of adjustments of an economic measure
are available, the legislative preferences in favour of one of them
cannot be questioned on the ground of lack of legislative wisdom
or that the method adopted is not the best or that there were better
ways of adjusting the competing interests and claims. The legislature possesses the greatest freedom in such areas. The analogy of
principles of the burden of tax may not also be inapposite in
SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU [FAIZAN UDDIN, J.) 565
dealing with the validity of the distribution of the burden of a 'fee' A
as well."
13. Now adverting to the facts of the present case it may be stated
that the High Court after comparing the scale of Court Fees and noticing
the difference in the incidence of Court Fees between 1922 Act and 1955 B
Act recorded the findings that the levy at 7 1/2 per cent under Article 1 of
Schedule 1 of the Madras Act of 1955 on an ad-valorem flat rate basis
without any limit does not satisfy the pre-requisites of a valid levy of Court
Fees as according to the High Court it has in itself more the element of
tax rather than the idea of quid pro quo. In other words there is no
correlation between the levy ot the Court Fees and the services rendered C
to the litigants in administration of civil justice. The High Court also took
the view that the levy at the aforesaid rate imposing on a particular section
of litigants is grossly dis-proportionate part of the burden and, therefore,
deserves to be struck down being unreasonable and arbitrary. Further, the
High Court, after considering the affidavit filed by Mr. Kelu Eradi on D
behalf of the
Government and also the statements appended to the
supplemental counter affidavit for the years 1955 to 1965 found that except
for the year 1954-55 the State was making yearly profit varying between 9
to 21 lacs. With regard to the year 1954-55 the High Court found that the
total actual receipts for 1954-55 were Rs. 122.12 lacs as against the expenditure of Rs. 124.94 lacs for the said period. According to the High Court
the aforementioned figures of expenditure included Rs. 36.70 lacs relating
to the criminal Courts. Rs. 3.57 lacs to Presidency Magistrate Courts. Rs.
6.26 lacs to Law Officers to the Government and Rs. 58.31 lacs pertaining
to the Civil & Sessions Courts and took the view that the expenditure
incurred by the Government in payment to their Law Officers cannot be
debited to the cost of administration of justice which the litigant can be
required to compensate for. The High Court also took the view that the
criminal Courts do not render any service to the litigants and the expendiE
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ture in the administration of criminal justice is not debitable to the cost of
administration of civil justice in Courts. On these reasonings the High G
Court in support of its aforementioned conclusions took the view that if
the aforementioned total sum of Rs. 46.53 lacs and part of Rs. 58.31 lacs
under the head "Civil and Sessions Courts" are deducted the total net
balance would be less than Rs. 78.41 lacs and the State thus had earned a
profit of Rs. 43.71 lacs over the expenditure of about Rs. 78.41 lacs in the
year 1954-55.
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14. Having regard to the decisions and various pronouncements cited
above it is difficult to accept the reasoning and the view taken by the High
Court in the impugned judgment. As discussed above if the essential
character of the levy is that some special service is intented as qui pro quo
to the class of citizens when is intended to be benefited by the service and
a broad and general correlation between the amount so collected and the
expenses incurred in providing the services is found to exist, then such levy
would partake the character of a "fee", irrespective of the fact that special
services for which the amount by levy of fee is collected incidentally and
indirectly benefit the general public also. In order to establish the correlation between the amount recovered by way of "fee" and the expenses
C incurred in providing the service they should not be examined so minutely
or be weighed in golden scale to discern any difference between the two.
It is not necessary to ascertain the same with any mathematical exactitute
for finding the correlation out the test would be satisfied if a broad and
general correlation. is found to exist and once such a broad correlation
D between the totality of the expenses on the services rendered as a whole,
on the one hand and the totality of the amount so raised by way of the fee,
on the other is established, it would be no part of the legitimate exercise
in the examination of the constitutionality of the concept of the impost to
embark upon its effect in the individual cases. If the aforesaid relation is
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found to exist in the levy of the fee, the levy cannot be said to be wanting
in its essential character of a fee on the ground that the measure of its
distribution on the persons or incidet1.ce is disproportionate to the actual
services made available to them. In view of this position of law the view
expressed by the High Court that ad-valorem levy of Court Fee in an
individual case far exceeds the maximum value, in terms of money, qua that
contributor and hence the concept of correlation fails and renders the levy
invalid and illegal cannot be accepted for the simple reason that the
correlation is not in the context of individual contributors, the test being
its ascertainment on a comprehensive basis keeping in view the value of
the totality of the service, qua, the totality of receipts.