MUNICIPAL CORPORATION OF DELHf

AND OTHERS

MOHD. YASIN ETC.

April 28, 1983

(D. A. DESAI AND 0. CHINNAPPA REDDY, JJ.)

Tax and fee, contradistinction-Fees for slaughtering animals at slaughter houses enhanced by the Municipal Corporation, eightfold Legality of the enhancemeni-Whether the enhanced fee for slaughterinu animals was wholly dispropor~ tionate to the cost of the services and supervision and the,.efore, not a fee, but a tax.

As per the rates fixed in the year 1953 by the Municipal Corporation of :, Delhi, the slaughtering fees were 0.25 paise for each animal, in the case of sheep, goats and pigs and rupees one for each animal in the case of buffaloes.

By a Notification dated 31.1.1968, the Corporation purported to enhance the fi slaughtering fee in both the categories eightfold, with effect from February 1,

1968. Some butchers of the city questioned the revision of rates on the ground that the proposed enhanced fee was wholly disproportionate to the cost of the .services and supervision and was in fact' not a fee, but a tax.

During the pendency of the writ petitions in the High Court, by virtue of an interim arrangement, the appellant, was permitted to collect slaughtering fees at double the rates fixed in 1953 and as a result thereof the Corporation realised a sum of Rs. 4,24,494/-. The budget Of the Coi::poration under item XIV-B showed a sum of Rs. 2,56,000 as the expenditure involved in connection with the slaughter houses. Comparing the amount of actual realisatioh of fee , at the rates permitted by the court with the an1ount of expenditure as revealed by the budget and excluding from consideration all expenditure not shown in the budget from item XIV B, the 1.J:igh Court came to the conclusion that even if the original fee was'doubled the amount realised would be more than sufficient to meet the expenditure involved and, therefore, there was no reason at all for increasing the fee eightfold and so the proposed fee was no fee but_ a tax for which there is no legislative mandate. Hence the appeal by special leave.

Allowing the appeal, the Court

HELD: 1:1 The increase of the slaughtering fee from 0.25 p to Rs. 2.00 per animal in the case of small animals and from rupee 1.00 to Rs. 8.00 in

_.-L ,- the case of large animals was wholly justified, in the circumstan<; es of the case.

[1008 C-D]

1:2 True, the Municipal Corporation has realised a sum of Rs. 4,24,494 bf way of fees at the rate of Re. 00.50 per animal in the case of sheep, goats

1()1)6 §UPREME cOURT REPoRTS

(19MJ S.C.R.

and pigs and Rs. 21per animal in the case of buffalOfS, whereas the budget of the M.C.D. showed under item XIV-B that an amount of Rs. Z,56,000 was expended in connection with slaughter houses. The items of expenditure covered by item XIV-B of the Municipal Budget are evidently those items of

cxnditure which are incurred directly and exclusively in connection with slaughter houses. ,_.There al't' several other items of expenditure the whole or part of which is attributable to slaughter houses like the expenditure involved in the purchase, maintenance and the use of trucks and other vehicles for the removaJ of filth from slaughter houses, conservancy, petrol oil etc., the expenditure incurred in connection with the maintenance of supervisory staff like a full time Veterih!lry Officer, Municipal Health Officer, Deputy Health Officer and Zonal Head Officers, the cost Of depreciation of the buildings and fittings in slatightr houses, expansion and improvement of slaughter houses for utilities etc. but actually debited to other heads of account under the Municipal budget.

Appatently, the High CdUrt was under an erroneous impression that the fees collected shdUld be shown to be related to expenditure incurred directly and exclusively in connection with the slaughtering of animals in its slaughter houses and also, shown as such in the Municipal budget. [1007 B-H, 1008 A-BJ

2. Vicissitudes of time and necessitudes of history contribute to changes of philosophical attitudes, concepts, ideas and ideals and, with them, the mean ings of words and phrases and the language itself. The philosophy and the language of the law are no exceptions. Words and phrases take colour and character from the context and the times and speak differently in-different contexts and titnes. Words and phrases have not only a meaning but aJso a content, a lifing content, which breathes, and so, expands and contracts. This is particularly so where the words and phrases properly belong to other disciplines. ''Tax" and ''Fee" are such words. They properly belong to the world of public finance but since the Constitution and the laws are also concerned with Public Finance, these words have often been adjudicated upon in an effort to discern their content. [1002 D-Gj

3. From the decided cases beginning from Commissioner of Hindu Rtlieious Endowment•, Madras v. Shri IAl<:shmindra Thirtha Swamiyar [1954] S.C.R. 1005 till date, it is clear that : (l) There is no generic difference between a tax and fee, though broadly a tax is a com;>"ulsory exaction as part of a Ctftnmon burden, without promise of any special advantages to cla*s of tax• 11ayerJ1 Whereas a f4!e is a payment for services rendered; benefit provided oi' privilege conferred; (ii) Compulsion is not the hall mark of the distinction between a tax and foe; (iii) That the money collected does not go into a sepl• rate fund but goes into the Consolidated Fund does not also necessarily iriake a levy tax.; (iv) Though a fee must have relation to the services rendered, or the advantage conferred, such relation need l'.lol be dirtct; a mere CEl'Sttal 'relation may be enough; (V) Further neither tlie incidence of the fee nor the service filndercd rteod be uniform; (vi) That others besides those paying the fees are als<J lienefited does not detract from the character of the fee; (vii) In fact the spM&l benefit or advantage to the payers of the fees may even be secondftty as Cdnipated With the primary motive of regulation in the public interest; (viii) Nor is the court to assume the role of a Cost Accountant. It is neither neces~ sacy nor expedient to mish too meticulousl1 the coil df thC services rendered

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'llftlNICJPAL coRPN. v. MOHD. llAsIN (CJhilfllllppa Reddy, J.) iooi

etc. lli&inst tho amount of feos collected so as to 0V<!Dl7 balance the two and

(ix) A cOrrelationship ia all that. is necessary. Qi#d pro quo in the 1trict aense is ncit the only true fndex Of a fee; nor is it necessarily absent in a tax. [ 1006 E-H, 1007 A-Bl

Commissioner of H. R. ll C. E., Madras v. Shri Labhmindra Thritha Swamiyar, [19541 S.C.R. 1005; H. H. Sudhundra v. Commissioner for Hin®

Religious am/ Charitable Endowments, [1963] Supp. 2 S.C.R. 302; Hingir-Rampur B Coal Co. ltd. and Others v. Tht Staie of Orissa and Others, [1961] 2 S.C.R. 537;

H.1l. SWdnllji v. CorlttnissloHet Hindu Religious & Chariiable Endowinlmts Dept. and Others, [1980] I S.C.R. 268; S'uthern Pharmaceuticals & Chemicals, Trtchur and Others etc. v. State of Xerala and Others, [198211 S.C.R. 519' referred to.

CIVIL APPELLATE JuR1SDICTION : Civil Appeal Nos. 2120 & 2125 C of 1970.

From the Judgment and Order dated the 17th April, 1970 of the Delhi High Court in Civil Writ Petitions Nos. 133 & 134 of 1968. .

Kapi/ Sibal, Rameshwar Dial, Adarsh Dial and S. Mitlar for the Appellants. ·

K. JJ. Rohtagi for the Respondents.

The following Judgment of the Court was delivered by

CHINNAPPA REDDY, J. By a notification dated 31.1.68, the Delhi Municipal Corporation purported to enhance the fee for slaughtering animals in its slaughter houses from Re. 00.25p to Rs. 2.00 for each animal, in the case of sheep, goats and pigs, and from Re. 1.00 to Rs. 8.00 for each animal, in the case of buffaloes. 'l'he notification was quashed by the High Court of Delhi on the

ground that the Corporation was really proposing to levy a tax under the guise of enhancing the fee.

The original rates were fixed in March 1953 and the revised rates were to take effect from February I,

1968. Some butchers of the city questioned the revision of rates on tlle ground that the proposed enhanced fee was wholly .dispropor tlonate to the cost of the services and supervision and was in fact . not a fee, but a tax. The High Court accepted the contention. of the butchers on what appears to us a superficial view of the facts and principles. Fortunately, ihe l'.tigh Court has certified tlie case as a fit one for appeal under Art. 133 (I)(c) of the Constitution and the matter is now before us.

. ·· "[f9&3t 2 S.C.fl.

Durit\g tlie pendency of tlie writ petitions in the High Court, by virtue of an interim arrangement, the Municipal-Corporation was permitted to collect fee at the rate of Re. 00.50p. per animal in the case of sheep, goats and pigs and Rs. 2.00 per animal in the case of buffaloes. As a result, the Municipal Corporation reelise'd a sum of Rs. 4,24,494 by Way of fee for slaughtering animals in its slaughter houses. Now, the budget of the Municipal Corporation under item XIV-B showed a sum of Rs. 2,56,0cO as the expenditure involved in connection with the slaughter houses; Comparing the amount of actual realisation of fee at the rates permitted by the Court with the amount of expenditure as revealed by the budget and excluding from consideration. all expenditure not show in the budget under item XIV-B, the High Court came to the conclusion that even if the original fee was doubled the amount realised would be more than . sufficient to meet the expenditure involved and there was, therefore, no warrant at all for increasing the fee eight-fold. So, it was said, the proposed fee was no fee but a tax for which there was no legis-. lative mand1te.

We sh1ll prsent\y point out the error into which the High Court fell on facts as well as principle.

A word on interpretation. Vicissitudes of time and necessitudes of history contribute to changes of philosophical attitudes, concepts, ideas and ideals and, with them, the meanings of words and phrases and the language itself. . The philosophy and the. language of the law are no exceptions. Words and phrases take colour and character from the context and the times and speak differently 'in different contexts and times. And, it is worthwhile remembering that words and phrases have not only a meaning but also a coutent, a living content which breathes, and so, expands and contracts. This is particularly so where the words and phrases properly belong to other disciplines.· 'Tax' and 'Fee' are such words.

They properly belong to the world of Public Finance but since the Constitution and the laws are also concerned with Public Finance, these words have often been adjudicated upon in an effect to discover iheir G content.

. Commissionet of Hindu Religious Endowments, Madras v. Shri Lakshmindra Thirtha Swamiyar(l) is conside_red the locus classicus on the subject of .the contradistinction b_etween 'tax' and 'fee'. The definition of 'tax' given by Latham, C.J. as ''a compulsory exaction

(I) (1954] S.C.R. IOOS.

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MuNICIPAL coRPN, v. MOHD. YASIN (Chinnappa JI.eddy, J.) ioo3

of money by public authority for public purposes enforceable by law and not payment for services rendered" was accepted, by the Court as stating the essential characteristics of a tax. Turning to fees, it was said "a fee is generally defined to be a charge for a special service rendered to indjviduals by some governmental ageney", but it was confessed, "as there may be various kinds of fee, it is not possible to formulate a definition that would be applicable. to all cases". As regards the distinction between a tax and a fee, it was noticed that compulsion could not be made the sole or even a material criterien for distinguishing a tax from fee. It was observed that the distinction between a tax and fee lay primarily in the fact that tax was levied as a part of a common burden, while a fee was a payment for a special benefit or privilege. But it was noticed that the special benefit or advantage might be secondary to the primary motive of regulation in the public interest, as for instance in the case of registration fees for documents or marriage licences. It was further noticed that Article 110 of the Constitution appeared to indicate two classes of cases where 'fees' could be imposed: (1) where the government simply granted a permission on privilege to a person to do something which otherwise that person would not be competent to do and extracted from him, in return, heavy or moderate fees

(ii) where the government did some positive work for the benefit of the person and money was taken as a return for the work d.one or services rendered, such money not being merged in the public reve nues for the benefit of the general public. It was however made clear that the circumstance that all the collections went to the Con

solidatd Fund of the State and not to a separate fund may not be conclusive. The Court finally observed that there was really no generic difference between the tax fees though the Constitution bad, for legislative purposes, made a distinction between a tax and a fee.

While there were entries in the legislative lists with regard to various forms of taxes, there was an entry at the end of each one of the three lists as regards fees which could be levied in respect of any of matters that was included in it. The implication seemed to be that fee had special reference to governmental action undertaken in respect to any of those matters.

In HH Sudhandra v. Commissioner Jot Hindu Religious & Chari• table Endowments(!), the Court reiterated the principle that a levy in

(1) (1963] Supp. 2 S.C.R. 3()2,

iao4 iil*EME COUR.T ltl!POil'rs ti9h} 1 s.c.~.

the nature of a fee did not cease to be df that cMraeter merely

beause there was any element of cotttpulsi011 or coerciveness ; tireserit in it, and aided.

"Nor is it a postulate of a fee that it must have direct relation tel the actual services rendered by the a:rithority to individual who obtains the benefit of the service. tf 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 reaoonable relation hlltween the levy and the expenses incurred for rendering services, the levy would be in the nature of a fee and not in the nature of a tax ........ but a levy Will

not be regarded as a tax merely because of the abSence of unity in its incidence, or because of compulsion in the collection thereof, nor because some of the contributories do not obtain the same degree of service as others may."

In Hingir-Rampur Coal Co. Ltd. & Ors. v. The State of Ori:Ja and 9rg.;(1) the Court while reiterating that there was an e!etnent of quid pto quo between the person paying the fee and the authority imposing it, said :

"If specific services are rhdered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said

services or in return for them oess is levied again!ll the said area or the said class of persons or trade or business, the cess is distinguishable from a tax and is described 11sa foe."

Later it was said :

"It is true that when the lagislature levies a fe! for rendering specific services to a specified area or to specified, class of persons or trade or business, in the last analysis such services may indirectly form part of services to the public in general. If the. special service rendered is distltictly and primarily meant for the be'nllf!tof a specified class or area the fact that in belie• fitt!ng the specified class or area the State as a whole may

(1) [1961) 2 S.C.R. S31,

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).lU}; ICJl'AL CORPN. v. 14PJIP, ra&JN (ChillnfJ, p!'a Reddy. J.) 1.0QS .

ultitely 1md ind, irectly be l>enefittd wo11Jd not detpi, ct from the chiiracter of the levy as a fee. WIJ.ere. 4owever, the specilic. service is inl!istinguishable fr9m public iervice, and in essence is directly a part of it, dirent considerations may arise. In such a case, it is necessary t!> enquir.e wlJ.at is th!l primary object of tile levy 1111d the essential purpose w bi ch it is inten4ed to hivi:.

I~ primary object and the esseJl.tial p11rpose 1UUSt be diti11 guished from its ultimate or incidental results or conse q11ences. That is tile tr~ test in <Jeter1Uiniu~ the cJiara~

ter of the levy,"

In H.IJ. Swamiji v. Commissioner, l{ind!t J?.ligio~ & Chari table Endowments Depgrtment and Ors.,(1) Chandrach11d, Cl. speaking for the Col)stitution Beil.ch, emphasjsed the necessity as well as the sufficiency of a broad correlationship between the services rendered and the rees charged and discounted the :, ttempts to go illto minutiae to discover meticulously whether or not there was matheiµatical equality. He said, "For the purpose of finding whether there is a correlationship between the services rendered to t)le fee payers and the fees charged to them, it is necessary to know the cost incurred for organising and rendering the services, l!ut matters involving consideration of such 11 correlationship are not required to be proved by a mathematical formula. What has to be seen is whether there is 11 fair correspondence between tile fee charged and the cost of services rendered to the fee payers as a class. The further and better particulars asked for by the appellants under VI, rule 5 of the Civil Procedure Code, would have driven the Court, had the paf!iculars been supplied, to a Jabori.ous and fruitless inquiry into minute details of the Comlllissi•

oner'1 departmental budget. A vivisection of the aJ!lounts spent by the Commissioner's establishment at different places fqr various pur~ poses and the ad-hoc allocation by the Court of different amounts to different heads would at best have been speculative. It woµld have 6een no more possible for the High Court if th~ inforllll1tio11 were before it, t!ian it would be"possible for us if t~. information were before us. to find 011t what pat'! of the expenses in\alrre<). by the Commissioner's establishme11t at various pl.flees and. wha.t part of t.he salary of \\is staff at those places should be allocated IP the f1,1nctions - ' - ~

(!) [1980j 1 S.C.R,. 3~~.

\006 SUPREME CoURT REPORTS [1983} 2 s.c.R.

discharged by theestablishment in connection with the services randered to the appellants. We do not therefore think that any t substantial prejudice has been caused to the appellants by reason of the non-supply of the information sought by them,"

In Southern Phamaceuticals & Chemicals Trichur & Ors. etc. v.

State of Kera/a & Ors. etc,, (1) A.P.Sen, J. speaking for the Court noticed the broadening of the Court's attitude and observed :

"It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence, are taken to the consolidated fnnd of the State and are not separately appropriated towards the expenditure for rendering the se_rvices is not by itself decisive. That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to a separate fund and not to the consolidated fund. It is also increasingly realised that _the element of quid pro ql'o stricto senso is not _always a sine qua non of a fee. It is needle to streess that the element of quid pro quo is not necessarily absent in every tax ................. .

The Traditional Concept of Quid Pro Quo Is Undergoing

A Transformation."

What do we learn from these precedents? We learn that is no generic difference between a tax and a fee, though broadly a tax is a compulsory exaction as part of a common burden, without promise of any special advantages to classes of taxpayers whereas a fee is a: payment for services rendered, benefit provided or privilege conferred'.

Compulsion is not the hall-mark of the distinction between a tax and a fee. That the money collected does not go into a separate fund_ but goes into the consolidated fund does not also necessarily make a levy a tax. Though a fee must have relation to the services rendered, or the advantages conferred, such relation need not be direct : a mere causal relation may be enough. Further, neither the incidence of the fee nor the service rendered need be uniform. That others besides those paying the fees are also benefited does not detract from the character of the fee. In fact the special benefit or advantage to the payers of the fees may even be secondary as com-

[I) [1982] S, C.R. 519,

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Wl!IIClPAL CORPN. V.J•IOl; ID. Y.\.SIN lChinnappa Reddy, J.) 1007

pared witht the primary motive of regulation in the public interest.

J Nor is the Court to assume the role of a cost accountant. It is neither necessary nor expedient to weigh too meticulously the cost of the services re11dered etc. against the amount of fees collected so as to evenly balance the two. A broad correJationship is all that is ne

cessary. Quid pro quo in the strict sense is not the one and only true index of a fee; nor is it necessarily absent in a tax.

What do we have in the present case? True, the Municipal Corporation has realised a sum of Rs. 4,24,494 by way of fees at the rate of Re. 00.50p. per animal in the case of sheep, goats and pigs and Rs. 2.00 per animal in the case of buffaloes, whereas the budget of the Municipal Corporation showed under item XIVB that an amount of Rs. 2,56,000 was expended in connection with slaughter houses. But as explained in the affidavit of Dr. A. C. jwani Deputy Health Officer (Public Health) of t)le Municipal Corporation of Delhi, the amount of Rs. 2,56,000 covers only thos~ items of expenditure as are reflected in item XIV-B of the Municipal Budget. The items of of expenditure covered by item XIV-B of the municipal budget are evidently those item of expenditure which are incurred directly and exculsively in connection with slaughter houses. In addition there are several other items of expenditure connected with slaughter houses but which are not included in item XIV-B. To name a few~ there is the expenditure involved in the purchase, maintainance and the use of trucks and other vehicles for the removal of .filth and refuse from slaughter houses.

These expenses, though attributable to slaughter houses, are debited in the municipal budget under other heads such as transport, conservancy, petrol and oil etc. There is also the expenditure incurred in connection with the maintainance of supervisory staff like a full time Veterinary Officer, and a Municipal Health Officer, Deputy Health Officer, Zonal Health Officer etc., a considerable part of whose duties are connected with slaughter houses.

There is then the cost of depreciation of the buildings ar.d fittings in the slaughter houses. There is also the provision for ex pansion and improvement of slaugter house facilities.

There are several other items of expenditure the whole or part of which is attributable to slaughter houses. Unfortunately, the High Court refused to look at any of these formidable items of expenditure on the ground that the Corporation could not ask the Court to look at any figures Other than the figure mentioned under item XIVB of the municipal budget. Aparently the High Court was under the impression t!mt the fees collected should be s)lown to be related to

1008 ' ' ' ''

SUPREME COURT REPORTS. '

[19S3J :2 S.C.R.

expenditure incurred directly and exclusively ip connectioiL with th<; slaughtering of animals in its &laughter houses and also, shown as -·-r I: such in the municipal budget. This was a· wholly erroneous

approach, in the light of what we have said earlier. We have ex• plained earlier that the expenditure need not be incurred directly nor even primarily in connection. with the special . benetit or. adv1111tage . conferred. . We have also explained. that there !leed. not be any fastidious balancing of the cost of the services rendered with the fees collected. It appears to have been common ground before th~ High Court that the price of !Peat had. gone up. about IO to J2 times since the rates were original fixed. If so~:one wonders how the. Municipal _ _j__ _.

Corporation coiild be expected to effectively discharge its obligations in connection. with the supervision of th~ slaughtering of animals in the slaughter houses maintained by it by merely raising the rates two-fold and three-fold. ·· The increase from Re. 00.25p to Rs: 2.00 per animal in the case of small animals and from_ Re. l.OO to Rs. 8.00 in the case of large aninials appears to us to be wholly justified in the circumstances of the case, The appeal is therefore, allowed with i:osts the judgment of the Higl1Court set aside an, d the Writ Petition_ filed ill _the High Court dismissed with costs. •

S.R. , ·.Appeal allowed . .

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