B.J.DIVAN, P.N.BHAGWATI, P.D.DESAI - (1.) I entirely agree with my brother Divan J. but in view of the importance of the question involved I would like to add a few words of my own in regard to the last contention of the petitioners that the Courtfees levied on an application for a reference under sec. 18 of the Land Acquisition Act 1894 is not a fee but a tax and Article 15 of the First Schedule to the Bombay Courtfees Act 1959 which provides for levy of such courtfees is therefore outside the legislative competence of the State Legislature. It was common ground between the parties and in any event it cannot now be disputed in view of a recent decision given by the Supreme Court on 11th November 1972 in Civil Appeal No. 293 of 1967:- The Secretary Government of Madras Home Department v. Zenith Lamp & Electrical Ltd. (yet unreported) (A.I.R. 1973 S.C. 724) that if Courtfee levied under Article 15 of the First Schedule is a tax and not a fee it would be beyond the competence of the State Legislature to enact such an Article. The main question which therefore arises for consideration is whether courtfee levied under Article 15 of the First Schedule is a tax or a fee. Whatever might have been the complexity of this question at one time it is not now difficult of solution in view of the decision of the Supreme (.Court in The Secretary Government of Madras Home Department v. Zenith Lamp & Electrical Ltd. (supra) to which we have just adverted. There the test to be applied for the purpose of determining a question of this kind is laid down in clear and unmistakable terms and all that we have to do is to apply this test and arrive at the proper result.
(2.) The question which arose for determination before the Supreme Court in the Secretary Government of Madras Home Department v. Zenith Lamp & Electrical Ltd. (supra) was whether Rule 1 of the Madras High Court Fees Rules 1958 and the provisions of the Madras Courtfees and Suits Valuation Act 1955 were ultra vires and void in so far as they related to the levy of fees on ad valorem scale. The main ground of challenge was that the levy made under the Madras Courtfees and Suits Valuation Act 1955 was a tax and not a fee and the said Act was Therefore outside the competance of the State Legislature and Rule 1 of the Madras High Court Fees Rules 1958 which incorporated some of the provisions of the said Act by reference was also consequently void. This challenge found favour with the Madras High Court and taking the view that the impost levied under Article I of Schedule 1 of the Madras Courtfees and Suits Valuation Act 1955 was a tax and not a fee the Madras High Court struck down that Article in its application to the High Court. The State of Madras thereupon preferred an appeal to the Supreme Court. The question as to what is the true nature of fee taken in Court and how it differs from tax was canvassed at great length before the Supreme Court and after referring to the historical background of the enactment of Courtfee legislation in England as well as India the Supreme Court laid down certain propositions which may be regarded as finally settling the law on the subject. The Supreme Court first pointed out that fees taken in Court in Entry 3 of List II cannot be equated with taxes and then proceeded to discuss the question whether there is any essential difference between fees taken in Court and other fees and answered it by saying that there is no difference. What is the true nature of fee was then discussed by the Supreme Court and the following passage from the judgment of Hegde J. in Indian Mica and Micanite Industries Ltd. v. The State of Bihar A.I.R. 1971 S.C. 1182 was relied upon by the Supreme Court as explaining the essential characteristics of fee: From the above discussion it is clear that before any levy can be upheld as a fee it must be shown that the levy has reasonable correlationship with the services rendered by the Government. In other words the levy must be proved to be a quid pro quo for the services rendered. But in these matters it will be impossible to have an exact correlationship. The correlationship expected is one of a general character and not as of arithmetical exactitude. The Supreme Court applying the test laid down in this passage observed and what it said is very important for our purpose. 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 matters 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 schemes that a State may have. There must be a broad correlationship with the fees collected and the cost of Administrative of civil justice. (The underlining is ours). The Supreme Court then dealt with the contention that Court fee is not in the nature of fee because the moneys realised from courtfee are not appropriated to a separate Fund but merged in the public revenues of the State This contention had found favour wish the High Court of Allahabad in Khacherusing v. Sub-Divisional Officer Khurja I.L.R. (1960) 1 All. 429 and the Bombay High Court in Central Provinces Syndicate Ltd. v. Commissioner of Income-Tax Nagpur I.L.R. (1962) Bombay 208 but the Supreme Court took the view that it is not a valid contention and the fact that the collections from Courtfee are not set apart to go into the Consolidated Fund is not at all conclusive because under Article 266 all revenues received by the State have to go to the Consolidated Fund. The Supreme Court then proceeded to summarise its conclusions by saying:- ... the fees taken in courts and the fees mentioned in Entry 66 List 1 are of the same kind. They may differ from each other only because they relate to different subject matter and the subject matter may dictate what kind of fees can be levied Conveniently but the overall limitation is that fees cannot be levied for the increase of general revenue. For instance if a State were to double court fees with the object of providing money for roadbuilding or building schools the enactment would be held to be void It seems to us that whenever the State Legislature Generally increases fees it must establish that it is necessary to increase court fees in order to meet the cost of administration of civil justice as soon as the broad correlationship between the cost of the administration of civil justice and the levy of courtfees ceases the imposition becomes a tax and beyond the competence of the State Legislature. (The underlining is mine.) We agree with the Madras High Court in the present case that the fees taken in Courts are not a category by themselves and must contain the essential elements of the fees as laid down by this Court. We also agree with the following observations. If the element of revenue for the general purposes of the State predominates then the taxing element takes hold of the levy and it ceases to have any relation to the cost of administration of the laws to which it relates; it becomes a tax. Its validity has then to be determined with reference to its character as a tax and it has to be seen whether the Legislature has the power to impose the particular tax. When a levy is impugned as a colourable exercise of legislative power the State being charged with raising a tax under the guise of levying a fee courts have to scrutinize the scheme of the levy 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. It seems to us that we cannot dispose of this appeal without giving 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. (The underlining is mine). The Supreme Court finally pointed out that it is for the State to establish that what has been levied is court fees properly socalled and if there is any enhancement the State must justify the enhancement.
(3.) The question which we have therefore to consider is whether in the present case there is broad relationship between the levy of courtfee and the cost of administration of civil justice or the levy of courtfee is excessive to such an extent as to be a pretence of a fee and not a fee in reality. Is the levy of courtfee in substance for meeting the cost of administration of civil justice or is it for raising revenues also for the general purposes of the State ? Or in other words is the State making profit out of the administration of civil justice ? The burden of establishing that the courtfee levied is courtfee properly socalled and not tax is as pointed out by the Supreme Court in The Secretary Government of Madras Home Department v. Zenith Lamp & Electrical Ltd. (supra) on the State. Let us therefore see whether the State has succeeded in discharging this burden which rests upon it.;