Decided on February 22,1952



- (1.) The petitioner is a partner of a firm carrying on the business and trade of an oil miller under the name and style of Madras Oil Mills and Products. The Oil mill owned by the firm has got five expellers which are used for crushing groundnut and producing groundnut oil and groundnut cake. The firm had been granted a licence under the Madras Manure Dealers' Licensing Order. The fee for the said licence was Rs. 10 from the year 1947.-By G.O. No. Ms. 2435 (Food and Agriculture) dated the 29th December 1950 an amendment was made to the Madras Manure Dealers Licensing Order, 1949, providing for the enhancement of the licence fee. The rate so far as oil mills were concerned was fixed at Rs. 100 for each expeller and Rs. 20 for each rotary or screw press. For mere dealers in manure the licence fee was fixed at Rs. 20 and for firms engaged in manure mixing trade the licence fee was fixed at Rs. 100 with a non-recurring fee of Rs. (30 for each manure mixture marketed. In accordance with this amendment the petitioner's firm became liable to pay a sum of Rs. 500 as licence fee as there were five expellers in the Mill. The petitioner seeks to have the aforesaid G. O. dated the 29th December 1950 enhancing the licence fee quashed by a Writ of Certiorari.
(2.) The main ground on which the enhancement is impugned is that the new rate of fee is disproportionately high and virtually amounts to levy of a tax. The K.C. Varadachari, Partner, Madras Oil Mills and Products vs. The State of Madras, by... Page 2 of 9 material allegations are contained in paragraph 9 of the affidavit which runs as follows: "I submit that the Government by levying such disproportionately high rate of licence fee are in fact levying a tax which can only be done by the Legislature and not by the Executive. Further the licence fee should be only to cover the cost of issuing licences and for general supervision and in this case I submit that except that the Madras Manure Dealers Order makes it obligatory for me to make returns of production and sale of oil, there is absolutely no control over the dealers in manure by the respondent and oven the sum of Rs. 10 previously collected per year is in effect a tax and not a licence fee." He also attacks the new amendment on the ground that the classification adopted by it is discriminatory and is inconsistent with the provisions of Art. 14 of the Constitution.
(3.) On behalf of the State the Joint Director of Agriculture filed a counter affidavit supporting the amendment. He stated that there had been frequent complaints from the public of adulteration of oil cakes used as cattle food and manure as well as other kinds of manure and the Govt. have approved of certain amendments to the Madras Manure Dealers' Control Order the enforcement of which would ensure good quality in manure. To enforce these amendments it is said that the staff of inspectors and analysts for analysing manure samples had to be strengthened. A statement was given of the strength of the staff employed and the expenditure by the Govt. on this account during 1950 and 1951 which showed a total of Rs. 43,389. It was further stated that the question of employing additional staff for the purpose at an estimated cost of Rs. 56,720 was under the consideration of the Government. The justification for the imposition of the enhanced licence fee may be stated in the language employed in the counter affidavit which is as follows: "In fixing the different scales for different classes of licences what was prominently kept in view was that the scale of taxation or licence fee should be based on the work involved and cost of the control and inspection necessary. It is the millers who supply the dealers with oil cakes, and frequent checks to ensure quality are therefore necessary at the very source. It cannot therefore be contended that the imposing of licence fee is not justified by consideration relating to the interests of the general public." and further on, "When compared to the cost of installing and working an oil mill, the enhanced licence fee of Rs. 100 per expeller per annum is an insignificant amount. The capacity to pay and the fact that oil mills are the source of supply of oil cakes to dealers and hence frequent checks have to be made at the source were prominently kept in view in proposing the enhancement of licence fees." K.C. Varadachari, Partner, Madras Oil Mills and Products vs. The State of Madras, by... Page 3 of 9 It is now well established that there is a fundamental difference between a tax and a licence fee. The issue of licences to regulate particular branches of business or specified trades or occupations and other matters is part of what in American constitutional law is called "the police power" of the State. For the grant of a licence a fee may be charged to cover probable expenses which may have to be incurred for the regulation of the particular trade or business or calling in respect of which the licence is required. The licence fee is not intended to raise revenues for the general purpose of the authority levying the fee. For such purposes the levy should be in the shape of a tax. The licence fee must be reasonable, whereas a tax need not be.;

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