Appeal No 1424 of 1966
Appeal from the order dated February 11 1965 of the Punjab High Court Circuit Bench at Delhi in Civil Writ No 3 D of 1963
HR Gokhale DR Thadani and AN Goyal for the
appellant
Jagdish Swarup Solicitor General LM Singhvi and RN Sachthey for the respondents
The Judgment of the Court was delivered by Grover J
This is an appeal from a judgment of the Punjab High Court Circuit Bench Delhi involving the question of the validity of Rule 7 read with Rule 5 and its Schedule of the Delhi Factories Rules 1950 made under section 112 of the  hereinafter called the Act
The impugned Rules relate to the grant of a licence for a factory and renewal thereof the fees
being prescribed by the Schedule to
Rule 5
The Delhi Cloth and General Mills Co Ltd operates within the Delhi area a number of industrial establishments which are factories within the meaning of section 2m of the Act
The company has to pay a total sum of Rs 1277500 as annual licence
fee for all its factories in Delhi the fees being calculated according to the Horse Power and the maximum in number of workers to be employed on any day during the year as given in the Schedule
The maximum fee that is payable is Rs 2000 for a factory
The factories can be run only after registration and under a licence granted under the Act and the Rules on payment of the prescribed fee
The licence is renewed every year under R 7 on payment of the same fee which is paid at the time of the granting of the licence
Every licence granted or renewed remains in force up to December 31 of the year for which it is granted or 350 renewed
In January 1963 the company filed a petition under articles 226 and 227 of the Constitution in the High Court challenging the validity of the Rules under which the licence fee for renewal of the licence for each of its factories in Delhi was being levied and collected ieR 7 read with R 5 and its Schedule
This petition was dismissed by a division bench on February 11 1965
The company then filed the present appeal by certificate
The principal point which has been canvassed on behalf of the appellant company is that the payment made  for renewal of the licence was and is only to endorse the licence as valid for the next year and the amount charged for the renewal thereof cannot and does not entail services which can reasonably be regarded to be commensurate with the amount so charged
In other words the element of quid pro quo which distinguishes a fee from a tax is absent and lacking
The Act it is pointed out contains specific provisions for rendering of benefit and service to the workmen by the owners of the factories
The Inspectors who are appointed under the Act to ensure that its provisions are complied with by the factory owners constitute a policing agency and it is not possible to say that the power and duties of the Inspectors when exercised and carried out amount to services rendered for the benefit of the factory owners or the workmen
Falshaw CJ who delivered the judgment of the division bench was of the view that the work carried out by the Inspectors under the Act of seeing that all its beneficient provisions for the health and welfare of the workers employed in the factories were fully implemented must definitely be regarded as services rendered in return for the fee levied for the annual renewal of the licence for the factory
It was further observed on an examination of the affidavit which had been placed before the court that at least 60 of the amount realised as licence fee was being utilised on running the department
Mr HR Gokhale for the appellant company has contended that the High Court failed to apply the principles which are settled by certain decisions of this Court for determining whether a fee for a licence or a renewal thereof in circumstances similar to the present case is in substance and effect a tax
He has relied largely on Corporation of Calcutta  Another vs Liberty Cinema1
In that case the licence fee had been raised from Rs 400 to Rs 6000 per year
It was observed in the majority judgment that the provision under which the licence had to be taken out for a cinema did not refer to the rendering of any service by the Corporation of Calcutta
It was also
not obligatory on the Corporation to make any bye law under which 1 1955 2SCR477
351 services were to be rendered
If the bye laws were not made there would be no service to render
It was further pointed out that inspection by the authorities concerned could not be regarded as a service to the licence as it was meant only to make sure that the licensee carried out the conditions on which the licence had been granted to him
Some of the earlier decisions were considered as also the pronouncement in HH Sudhundra Thirtha Swamiar vs Commissioner for Hindu Religious  Charitable Endowments Mysore1 and with regard to the latter case it was said that a service resulting in the control of the Math adipathi conferred special benefit on the institution which alone paid the levy
As far back as 1954 it was laid down in Mahant Sri Jagannath Ramanui Das  Anr
vs The State of Orissa  Another2that the contributions levied for the expenses of the Commissioner and his staff who were to
exercise effective control over the trustees of the Maths and the temples was to
be regarded as a fee and not a tax
Two reasons were given for this 1 The payment was demanded only for the purpose of meeting the expenses of the Commissioner and his staff which is the machinery set up for due administration of the affairs of the religious institution
2 The collections made were not merged in the general public revenue
Similarly in Ratilal Panachand Gandhi vs The State of Bombay  Others3 the contribution imposed under the Bombay Public Trusts Act was held to be fee and not tax
it was stated that in the first place these contributions were to be credited to the Public Trusts Administration Fund which was a special fund land were not to be merged in the general revenue
Secondly it was not necessary that services should be rendered only at the request of particular people and it was enough that payments were demanded for rendering services which the State considered beneficial in the public interest and which the people had to accept whether they were willing or not
The following observations in HH Sudhundra Thirtha Swamiar case1 may be referred to with advantage A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to individual who obtains the benefit of service
If with a view to provide a specific service levy is imposed by law and expenses for maintaining the service are met out of the amounts collected there being a reasonable relation between the levy and the expenses incurred for render 1 1963 Supp 2 SCR 302
2  3 1954 SCR 1055
352 ing the service the levy would be in the nature of a fee and not in the nature of a tax
 According to Mr HR Gokhale the present case is of the type which would fall squarely within the decision in Liberty Cinema case1
It is difficult to agree
In each case where the question arises whether the levy is in the nature of a fee the entire scheme of the statutory provisions the duties and obligations imposed on the inspecting staff and the nature of work done by them will have to be examined for the purpose of determining the rendering of the services which would make the levy a fee
It is quite apparent that in the Liberty Cinema case it was found that no service of any kind was being or could be rendered and for that reason the levy was held to be a tax and not a fee
In our judgment the present case falls within the other class of cases to which reference has been made in which contributions for the purpose of maintaining an authority and the staff for supervising and controlling public institutions like Maths etc
were held to be fee and not tax
We may now look at the provisions of the Act
Chapter II provides for the inspecting staff
Section 9 gives the powers of the Inspectors
They can enter any factory and inter alia make examination of the premises plant and machinery
Under section 10 qualified medical practitioners can be appointed to
be certifying surgeons for the purpose of the Act
The certifying surgeon has to
carry out such duties as may be prescribed in connection with the examination and certification of young persons under the Act
the examination of persons
engaged in factories in dangerous occupation or process as also the exercising of medical supervision
Chapter III deals with health
Section Il contains detailed provisions about cleanliness
Sections 12 to 14 relate to disposal of waste and effluents ventilation and temperature and dust and fume
Sections 17 to 20 concern lighting drinking water latrines and urinals and spittoons
Chapter IV contains the provisions relating to safety
Section 21 deals with fencing of machinery
Section 22 with work on or near machinery in motion and section 23 with employment of young persons on dangerous machines
The other sections which may be noticed in this Chapter are section 27 containing the prohibition of employment of women and children near cotton openers section 35 in the matter of protection of eyes section 36 dealing with precautions against dangerous fumes section 37 relating to explosive or inflammable dust gas etc and section 38 relating to precautions in case of fire
Under section 39 if it appears to the Inspector that any building or part of a building or any part of the ways machinery or plant in a factory is in such a condition that it may be dangerous to human life and safety he may serve on the manager of the factory an order in writing  353 requiring him to
furnish the particulars for determining whether the building machinery plant etc can be used with safety or to carry out such tests as may be specified and convey the result thereof to the Inspector
Under section 40 if it appears to the Inspector that any building or part of a building is in such a condition that it is dangerous to human life or safety he can serve an order on the manager of the factory specifying the measures which should be adopted and requiring him to carry out the same before a specified date
Shnilarly if it appears to him that the use of any building or machinery or plant involves imminent danger to human life or safety he can serve an order prohibiting its use until it has been properly repaired or altered
Chapter V deals with welfare and provisions are made therein for such amenities as washing facilities for storing and drying clothing for sitting first aid appliances canteens and creches and every factory is required under section 49 wherein 500 or more workers are ordinarily employed to have such number of welfare officers as may be prescribed
The Rules also contain various provisions where the Inspector has to be consulted and his approval obtained for doing certain things
For instance R 653 says that the manager of a factory shall submit for the approval of the Chief Inspector plans of the building to be constructed or adapted for use as a canteen
It is unnecessary to refer to several other provisions contained in the Act and the Rules which show that the Chief Inspector and his staff play a very important role in the working of the factory
In the return which was filed in the High Court to the writ petition it was stated in paragraph 8 that the fees were being charged for the running of the whole establishment including the Factory Inspectorate which in its turn provides free inspection and expert technical advice etc to factory owners in matters connected with safety health welfare and the allied matters in respect of compliance with the provisions of the 
It has further been stated that in our country matters relating to health safety welfare and employment have to be looked after and the desired results have been sought to be achieved by the legislature by providing statutory inspection service
According to Mr Gokhale the Inspectors only carry out the duties laid on them under the Act and all that they have to do is to ensure that the statutory provisions and the rules are carried out properly and launch prosecutions against factory owners under the provisions of Chapter X of_ the Act in case of any breach or default on the part of the factory owners
We do not consider that the functions and duties of the Inspectorate are confined only to the limited task which has been suggested on behalf of the appellant company
A large number of provisions to which reference has been made particularly in the Chapter dealing with 354 safety involve a good deal of technical knowledge and in the course of discharge of their duties and obligations the Inspectors are expected to give proper advice and guidance so that there may be due compliance with the provisions of the Act
It can well be said that on certain occasions factory owners are bound to receive a good deal of benefit by being saved from the consequences of the working of dangerous machines or employment of such processes as involve danger to human life by being warned at the proper time as to the defective nature of the machinery or of the taking of precautions which are enjoined under the Act
Similarly if a building or a machinery or a plant is in such a condition that it is dangerous to human life or safety the Inspector by serving a timely notice on the manager saves the factory owner from all the consequences of proper repairs not being done in time to the building or the machinery
Indeed it seems to us that the nature of the work of the Inspector is such that he is to render as much
if not more service than a Commissioner would in the matter of supervision regulation and control over the way in which the management of the trustees of religious and charitable endowment was conducted
The High Court further found which finding being of fact must be considered as final that 60  of the amount of licence fees which were being realized was actually spent on services rendered to the factory owners
It can therefore hardly be contended that the levy of the licence fee was wholly unrelated to the expenditure incurred out of the total realisation
Before the High Court the appellant company never made out any case that the collections on account of the licence fee were merged in the general public revenue and were not appropriated in the manner laid down for the appropriation of expenses for the department concerned
There can be no manner of doubt that the amount which the appellant company has to pay as licence fee is not in the nature of a tax but is a fee which could be properly levied
The appeal fails and it is dismissed with costs
GC Appeal dismissed


Summary:
The appellant company had a number of industrial establishments in Delhi
These establishments were factories within the meaning of section 2Ira of the 
The factories could be run only after registration and under a licence granted under the Act and the Rules on payment of a prescribed fee
The licensee was renewable every year under R 7 on payment of the same
fee as for grant of the licence
The company filed a writ petition under articles 226 and 227 of the Constitution challenging the validity of the Rules under which the fee for renewal of the licence for each of its factories in Delhi was being levied and collected ieR 7 read with R 5 and its Schedule
The petition being dismissed by the High Court an appeal was filed in this Court with certificate
The contention on behalf of the appellant was that there was no quid pro quo for the fee paid for renewal of the licence and that the maintenance of a team of Inspectors under the Act did not amount to such quid pro quo
Reliance
was placed on the Liberty Cinema case
HELD In each case when the question arises whether the levy is the nature of a fee the entire scheme of the statutory provisions the duties and obligations imposed on the inspecting staff and the nature of tire work done by them wilt have to be examined for the purpose of determining the rendering of the services which would make the levy of a fee
In the Liberty Cinema case it was found that no service of any kind was being and could be rendered and for that reason the levy was held to
be a tax and not a fee
The present case however fell within the other class of cases in which contributions for the purpose of maintaining an authority and the staff for supervising and controlling public institutions were held to be fee and not tax
354 B C A large number of provisions of the Act particularly in the chapters dealing with safety involve a good deal of technical knowledge and in the course of discharge of their duties and obligations the Inspectors are expected to give proper advice and guidance so that there may be due compliance with the provisions of the Act
On certain occasions the factory owners are bound to receive a good deal of benefit by being saved from the consequences of the working of dangerous machines or employment of such processes as involve danger to human life by being warned at the proper time as to the defective nature of the machinery or of the taking of precautions which are enjoined under the Act
Similarly if a building or a machinery or plant is in such a condition that it is dangerous to human life or safety the Inspector by serving a timely notice on the manager saves the factory owner from all the consequences of proper repairs not being done in time to the building
or machinery
349 The High Court found that 60 of the amount of licence fees which were being realized was actually spent on services rendered to the factory owners
The finding being one of fact must be considered final
355 H 356 D 
It could therefore hardly be contended that the levy of the licence fee was wholly unrelated to the expenditure incurred out of the total realization
The appeal must accordingly fail
356 D El Corporation of Calcutta  Anr
vs Liberty Cinema  distinguished
HH Sudhundra Thirtha Swamiar vs Commissioner for Hindu Religious  Charitable Endowments Mysore 1963 Supp 2 SCR 302 Mahant Sri Jagannath Ramanuj Das  Anr
vs State of Orissa  Anr  and Ratilal Panachand Gandhi vs State of Bombay  Ors 1954 SCR 1055 applied