Case: Delhi Cloth &amp; General Mills Co. Ltd Vs. Chief Commissioner, Delhi &amp; Ors

2. 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 2 (m) of the Act. The company has to pay a total sum of Rs. 12,775.00 as annual licence fee for all its factories in Delhi, the fees being calculated according to the horse power and the maximum 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. 2,000 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 Rule 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 upto Dec. 31, of the year for which it is granted or 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 i.e., Rule 7 read with Rule 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.

Court's reasoning:
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 taxWe 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 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 dead 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 concerned. The High Court further found, which finding being of fact, must be considered as final that 60 per cent 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 concerne