Source: http://www.rishabhdara.com/sc/view.php?case=1190
Timestamp: 2019-12-16 13:08:46
Document Index: 703361984

Matched Legal Cases: ['Art. 372', 'Art. 372', 'Art. 32', 'Art. 32', 'Art. 254', 'Art. 54', 'Art. 372', 'Art. 372', 'art 1', 'art 11', 'art 563', 'Art. 372', 'Art. 372', 'Art. 372', 'Art. 372', 'Art. 372', 'Art. 372']

THE HINGIR-RAMPUR COAL CO., LTD. & ORS versus THE STATE OF ORISSA & ORS
1961 AIR 459	1961 SCR (2) 537
THE HINGIR-RAMPUR COAL CO., LTD. & ORS V. THE STATE OF ORISSA & ORS [1960] RD-SC 208 (21 November 1960)
21/11/1960 GAJENDRAGADKAR, P.B.
CITATION: 1961 AIR 459	1961 SCR (2) 537
R	1963 SC 703	(23) F	1964 SC1284	(11,14) D	1965 SC 177	(8) R	1965 SC1107	(17,48,50) APL	1970 SC1436 (14,15,16) R	1971 SC1182	(7) F	1975 SC 846	(14) RF	1976 SC1654	(5,19,24,25) AFR	1980 SC 1	(13) R	1980 SC1008	(13,14) RF	1980 SC1955	(41) RF	1981 SC 711	(11) RF	1981 SC 951	(11) R	1983 SC 617	(6) R	1983 SC 930	(7) F	1983 SC1246	(30) R	1984 SC 420	(15) RF	1985 SC 218	(7,9) D	1985 SC1211	(41) RF	1986 SC 726	(11) RF	1987 SC2034	(16) RF	1989 SC 317	(34) R	1989 SC2015	(10) F	1990 SC 85	(26,30) R	1990 SC1637	(47) E	1991 SC1676	(5,6,9,13,15,18,27,42,48,50,52 RF	1992 SC1383	(14) R	1992 SC2038	(3,7)
Mining Areas, Development of--Enactment by State Legislature authorising constitution of mining areas and	development fund-Imposition of cess-Constitutional	validity-Competency of State Legislature-Orissa Mining Areas Development	Fund Act, 1952 (Orissa XXVII of 1952), S. 4-Constitution of India,	Art. 372, Seventh Schedule, List II, Entry 23,	66, List I, Entries 52, 54, 84--Adaptation of Laws Order, 1950, cls. 16, 21.
The petitioners challenged the constitutional	validity of the Orissa Mining Areas Development Fund Act, 1952, which by s. 3 empowered the State Government to constitute mining areas for the	purpose of providing	them with certain amenities after hearing objections from the lessees, by s. 4 to impose and	collect a cess not exceeding	5% of	the valuation of the minerals at the pit's mouth and by s. 5 created	a fund to which the cess was to be credited.	The petitioners' case, inter alia, was that the impugned Act and the rules made thereunder were ultra vires the powers of the State Legislature, the cess levied thereunder was not a	fee but a duty of excise on coal within Entry 84 of List I of the Seventh Schedule to the Constitution and repugnant to Coal Mines Labour Welfare Fund Act, 1947 (Act XXXII of 1947),	and, alternatively, even supposing it	was a	fee relatable to Entries 23 and 66 of List II, it was hit by Entry 54 of List I read with the	Mines and Minerals (Regulation and Development) Act 1948 (Act LIII of 1948), or by Entry 52 of List I read with the Industries	(Development and Regulation) Act, 1951 (Act LXV of 1951). It was urged on behalf of the State, inter alia, that the cess was a	fee and not a duty of excise and the competence of the State Legislature to levy it was not affected by the Central Acts.
Held (per Gajendragadkar, Sarkar, Subba Rao and Mudholkar, JJ.), that the cess imposed by the Act was a fee relatable to Entries 23 and 66 of List II of the Seventh Schedule to the Constitution and the Constitutional validity of	the impugned Act was beyond question.
Although there can be no generic difference between a	tax and a fee since both are compulsory exactions of money by public authorities, there is this distinction between	them that whereas a tax is imposed for public purposes	and requires no consideration to support it, a fee is levied essentially for services rendered and there	must be an element of quid pro quo between the person 538 who pays it and the public authority that imposes it. While a tax invariably goes into the consolidated fund, a fee is earmarked for the specified services in a fund created	for the purpose.	Whether	a cess is one or the	other would naturally depend on the facts of each case. If in the guise of a fee, the Legislature imposes a tax, it is for the Court on a scrutiny of the scheme of the levy, to determine	its real character. The	distinction is	recognised by	the Constitution which while empowering the	appropriate Legislatures to levy taxes under the Entries in the three lists refers to their power to levy fees in respect of	any such matters, except the fees taken in court, and tests have been laid down by this Court for determining the character of an impugned levy.
Matthews v. Chicory Marketing Board, 60 C.L.R. 263,	The Commissioner, Hindu Religious Endowments, Madras v.	Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] S.C.R. 1005, Mahant Sri Jagannath Ramanuj Das & Any. v.	The State of Orissa, [1954] S.C.R. 1046, and Ratilal Panachand Gandhi v. The State of Bombay, [1954] S.C.R. 1055, referred to.
P. P.	Kutti	Keva & Ors. v. The State of Madras, A.I.R.
1954 Mad. 621, Attorney-General for British	Columbia v.
Esquimalt and	Nanaimo	Railway Co., (1950) A.C. 87	and Parton	& Any. v. Mils Board (Victoria), (1949) 80 C.L.R.
229, considered and held inapplicable.
In determining whether a levy is a fee the true test must be whether	its primary and essential purpose is to render specific services to a specified area or class, it being of no consequence that the State may ultimately and indirectly be benefited by it.
The amount of the levy must depend on the extent of	the services sought to	be rendered and if	they	are proportionate, it would be unreasonable to say	that since the impost is high it must be a duty of excise. The	rate specified by s. 4(2) of the Act, therefore, cannot by itself alter the character of the levy and constitute a trespass by the State Legislature	on the legislative powers of	the Parliament under Entry 84 of the List I.
Nor can the method prescribed by the Legislature for	re- covering the levy by itself alter its character. The method is a matter of convenience and, though relevant, has to be tested in the light of other relevant circumstances. It is not permissible to challenge	the vires of	a statute relatable to an Entry in List II solely on the ground	that the method adopted for the recovery of the impost can	and generally is adopted in levying a duty of excise.
Ralla Ram v. The Province of East Punjab, [1948] F.C.R. 207, Byramjee Jeejeebhoy v. The Province of Bombay & Anr. I.L.R.
539 1940 Bom. 58 and Governor-General in Council v. Province of Madras, (1945)'L.R. 72 I.A. 91, considered.
The limitation	imposed by the latter part of Entry 23 of List II is a limitation on the legislative competence of the State' Legislature itself and the test whether a statute passed	by the State Legislature thereunder was ultra vires would be whether the requisite declaration under Entry	54, List I, has been made by Parliament by law covering the same field or not;	it is not necessary in order to make	the declaration effective	that rules should also be made	and enforced.
Although by operation of Art. 372 of the Constitution	Act LIII of 1948 was an existing Act substantially covering	the same field as covered by the impugned Act, there was no adaptation of S. 2 of that Act whereby a declaration implied by it could be said to have been adapted to a declaration by Parliament. Clause 16 of the Adaptation of	Laws Order, 1950, properly	construed, cannot be held to refer to	the Dominion Legislature and equate it with the Parliament.	It can be	resorted to only where the existing law expressly refers	to some authority that can be equated with	the corresponding	new authorities. Since the Dominion Legislature was not so referred to, its competence under the Constitution Act of 1935, repealed by the Constitution of India,	was clearly outside the clause.	Nor can Cl. 21 of the order be of any help to the petitioners.
Consequently, in the absence of the requisite Parliamentary declaration, the competence of the Orissa State	Legislature under Entry 23 read with Entry 66 of the List II was	not impaired and the impugned Act must be deemed to have repeal- ed the Central Act, so far as that State was concerned.
This case incidentally discloses that in regard to	the requisite Parliamentary declaration prescribed by Entry 54 in List I in its application to the pre-constitution	Acts under corresponding Entry 36 in List I of the	Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of Laws Order, 1950.
Nor was the impugned Act ultra vires the State	Legislature by operation of Entry 52 of List I read with S. 2 of	the Industries (Development and Regulation) Act, 1951 (LXV of 1951).	That Act, in pith and substance, deals more directly with the control of certain specified industries including the coal industry, while the impugned Act is concerned	with the development of the mining-areas notified under it.	The field covered by the two Acts was not, therefore, the same.
per Wanchoo, J.-In order to determine whether a levy is a tax or a fee, what has to be considered is the pith and sub- stance of the levy. Where the levy in pith and substance is not essentially different from a tax, it cannot be converted into a fee by crediting it to a special fund and attaching certain services to it.
540 The Commissioner, Hindu Religious Endowments, Madras, v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954] S.C.R. 1005, Mahant Sri Jaannath Ramanuj Das v. The State of Orissa,	[1954] S.C.R. 1046 and Ratilal Panachand Gandhi v.
The State of Bombay, [1954] S.C.R. 1055, discussed.
A duty of excise in pith and substance is primarily a	duty levied	on a manufacturer or producer in respect of	the commodity manufactured	or produced. It is different	and distinct from a sales tax and in law they do not overlap.
Governor-General in Council v. Province of Madras, 72	I.A.
91, referred to.
What the impugned Act did was to provide for the levying of the cess on the goods produced at a rate not exceeding	five per centum of the value at the pit's mouth. The cess	was, therefore, in pith and substance a duty of excise falling within Entry 84 of List I, which the State legislature could not levy.
It was not correct to say that the method employed by	the impugned Act for realising the cess was a mere method of quantification and did not affect its character which	was that of a fee. In the present case the very mode of	the levy of the cess is nothing other than the levy of a duty of excise, and, therefore, the principle of quantification	for purposes of a fee could not be so extended as	to convert what was in pith and substance a tax into a fee.
Sri Byramjee Jeejeebhoy v. The Province of Bombay, I.L.R.
1940 Bom. 58, Municipal Corporation, Ahmedabad v. Patel Gor- dhandas	Hargovandas, I.L.R. 1054 Bom. 41 and Ralla Ram v.
The Province of East Punjab, [1948] F.C.R. 207, considered.
The cess levied under s. 4 of the Act could not be justified as a tax on mineral rights under Entry 50 of List II of	the Seventh Schedule and	the impugned Act was in effect a colourable piece of legislation.
Petition under	Art. 32 of the Constitution of India	for enforcement of Fundamental Rights.
M. P. Amin, Dara P. Mehta, P. M. Amin; S. N. Andley, J. B.
Dadachanji, Rameshwar	Nath and P.	L. Vohra for	the petitioners.
A. V.	Viswanatha Sastri, R. Ganapathy Iyer, P. Kesava Pillai and T. M. Sen, for the respondents.
H. N.	Sanyal, Additional Solicitor-General of India, B.
Sen and R. H. Dhebar, for the Intervener.
541 1960. November, 21. The, Judgment of P. B. Gajendragadkar, A. K.	Sarkar, K. Subba Rao and J. R. Mudholkar, JJ.,	was delivered by P. B. Gajendragadkar J., K. N. Wanchoo,	J., delivered a separate judgment.
GAJENDRAGADKAR, J.-This is a petition filed under Art. 32 of the Constitution in which the validity of the Orissa Mining Areas Development Fund Act,(-, 1952 (XXVII of 1952), is challenged. The first petitioner is a public limited company which has its registered office at Bombay. A large majority of its shareholders are citizens of India; some of them are themselves companies incorporated under the Indian Companies Act.	Petitioners Nos. 2 to 7 are the Directors of Petitioner No. 1, the second petitioner being the Chairman of its	Board	of Directors.	These petitioners are	all citizens of India. At all	material times	the first petitioner carried on and still carries on the business of producing and selling coal excavated from its collieries at Rampur	in the	State 'of Orissa. Two leases have	been executed in its favour; the first was executed	on October 17, 1941, by the Governor of Orissa whereby all that piece or parcel of land in the registration district of Sambalpur admeasuring about 3341.79 acres has been demised for a period	of 30 years commencing from September 1, 1939, in consideration of the rent reserved thereby and	subject to the covenants and conditions prescribed thereunder; and	the second	is a surface lease executed in its favour by	Mr.
Mohan Brijraj Singh Dee on April 19, 1951, in relation to a land admeasuring approximately 211.94 acres	for a	like period	of 30 years commencing from February 4, 1939, in consideration of the	rent and subject to the terms	and conditions prescribed by it.
Pursuant to s. 5 of the Orissa Estates Abolition Act, 1951, all the right, title and interest of the Zamindar of Rampur in the lands	demised to the first petitioner under	the second	lease vested in respondents, the State	of Orissa.
Since then the first petitioner has duly paid the	rent reserved by the said lease to the appropriate	authorities appointed by respondent 1, 69 542 and has observed and performed all	the conditions	and covenants of the said lease.	In exercise of its rights under the said two leases the first petitioner entered	upon the lands demised and has been carrying on the business of excavating and producing coal at its collieries at Rampur.
In December, 1952, the Legislature of the State of Orissa passed	the impugned Act; and it received the assent of	the Governor of Orissa on December 10, 1952. It was, however, not reserved for the consideration of the President of India nor has it received his assent. In pursuance of the rule- making power conferred on it by the impugned Act respondent 1 has purported to make rules called the Orissa Mining Areas Development Act Rules, 1955; these rules have been	duly notified in the State Gazette on January 25, 1955.
Subsequently, the Administrator, respondent 2, appointed under the impugned Act issued a notification on June	24, 1958, whereby	the first petitioner's Rampur colliery	has been notified for the purpose of liability for the payment of cess under the impugned Act. The area of this colliery has been determined at 3341.79 acres.	In its appeal filed under rule 3	before	the Director of Mines the first petitioner objected to the issue of the said notification, inter alia, on the ground that the impugned Act and	the rules framed under it were ultra vires and	invalid; no action	has, however,	been taken on the said appeal presumably because the authority concerned could not enter- tain or deal with the objections about the vires of the Act and the rules.
Thereafter on March 26, 1959, the Assistant Administrative Officer, respondent 3, called upon the first petitioner to submit monthly returns for the assessment of the cess.	The first petitioner then	represented that it had filed an appeal	setting forth its	objections against	the notification, and added that until the said	appeal	was disposed of no returns would be filed by it. In spite of this representation respondent 3, by his letter of May 6, 1959, called upon the 543 first petitioner to submit monthly returns in the prescribed form and issued the warning that failing compliance	the first petitioner would be prosecuted under s. 9 of	the impugned Act.	A similiar demand was made and a similar warning	issued by respondent 3 by his letter dated June 6, 1959.	It is under these circumstances that	the present petition has been filed.
The petitioners contend that the impugned Act and' the rules made thereunder are	ultra vires the powers of	the Legislature of the State of Orissa, or in any event they are repugnant to the provisions of an existing law. According to the petition the cess levied under the impugned Act is not a fee but is in reality and in substance a levy in	the nature of a duty of excise on the coal produced at the first petitioner's Rampur colliery, and as such is	beyond	the legislative competence of	the Orissa Legislature.
Alternatively it is urged that even if the levy imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II of the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of Entry 54 in List I read with Central Act LIII of 1948. The	petitioners further	allege that even if the said levy is held to be a fee it would be similarly ultra vires having regard to Entry 52 in List I read with Central Act LXV of 1951. According to the petitioners the impugned Act is really relatable to Entry 24 in List III, and since it is repugnant with Central Act XXXII of 1947 relatable to the same Entry and covering the same field the impugned Act is invalid to the extent of the said repugnancy under Art. 254. On these allegations the petitioners have applied for a writ of mandamus or a writ in the nature of the said writ or any other writ, order or direction prohibiting the respondents from enforcing	any of the	provisions of the impugned Act	against the first petitioner; a	similar	writ or order	is claimed against respondent 3 in respect of the letters addressed by him to the 1st petitioner on March 3, 1959 and June 6, 1959.
This petition	is resisted by respondent 1	on several grounds. It is urged on its behalf that the levy 544 imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II and its validity is not affected either by Entry 54 read with Act LIII of 1948 or by 'Entry 52	read with Act LXV of 1951.	In the alternative it is contended that if the said levy is held to be a tax and not a fee, it would be a tax relatable to Entry 50 in List II, and as such the legislative competence of the State Legislature to impose	the same cannot be	successfully	challenged.
Respondent 1 disputes the petitioner's contention that	the impugned Act is relatable to Entry 24 in List III; and	so, according to it, no question of repugnancy with the Central Act XXXII of 1947 arises.
After this appeal was fully argued before us Mr.	Amin suggested-and Mr. Sastri did not object-that we should	hear the learned Attorney-General on the question as to whether even if the levy imposed by the impugned Act is a	fee relatable to Entries 23 and 66 in List II of	the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of Entry 54 in List I read with Central Act LIII of 1948. Accordingly we directed that a notice on this point should be served on the learned Attorney-General and the case should be set down for hearing on	that point again.	For the learned Attorney-General the learned Additional Solicitor-General appeared before us in response to this notice and we have had the benefit of	hearing	his arguments on the point in question.
The first question which falls for consideration is whether the levy imposed by the impugned Act	amounts to a	fee relatable to Entry 23 read with Entry 66 in List II. Before we deal with this question it is necessary to consider	the difference between the concept of tax and that of a	fee.
The neat and terse definition of tax which has been given by Latham, C. J., in Matthews v. Chicory Marketing Board (1) is often cited as a classic on this subject. "A	tax",	said Latham, C. J., "is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not payment	for services	rendered". In	bringing out	the essential features of a tax this defini- (1) (1938) 60 C.L.R. 263, 276.
545 tion also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is	no generic difference. Both are compulsory exactions of money. by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by	any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the	fee and the public authority which imposes it.	If specific services are rendered 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 cess is levied against the said area or the	said class	of persons or	trade	or business the cess	is distinguishable	from a tax and is described as a fee.	Tax recovered by public authority invariably goes into	the consolidated fund which ultimately is utilised for	all public purposes, whereas a cess levied by way of fee is	not intended to be, and	does not become, a part of	the consolidated fund. It is earmarked and set apart for	the purpose	of services for which it is	levied.	There	is, however, an element of compulsion in the imposition of	both tax and fee.	When the Legislature decides to render a specific service to any area or to any class of persons, it is not open to the said area or to the said class of persons to plead that they do not want the service and therefore they should be exempted from the payment of the cess.
Though there is an element of quid pro quo between the	tax- payer and the public authority there is no option to	the tax-payer in the matter of receiving the service determined by public authority. In regard to fees there is, and	must always	be, co-relation between the fee collected and	the service	intended to be rendered. Cases may	arise where under the guise of levying a fee Legislature may attempt to impose a tax; and in the case of such a colourable exercise of legislative	power courts would have to scrutinise	the scheme	of the levy very carefully and determine whether in fact there is a co-relation between the service and	the levy, or whether the levy is either not co-related	with service or is levied to such an 546 excessive extent as to be a presence of a fee and not a	fee in reality. In other words, whether or not a particular cess levied by a statute amounts to a fee or tax would always	be a question	of fact to be	determined in	the circumstances of each case. The distinction between a	tax and a fee is, however, important, and it is recognised by the Constitution. Several Entries in the	Three Lists empower	the appropriate Legislatures to levy	taxes;	but apart from the power to levy taxes thus conferred each	List specifically refers to the power to levy fees in respect of any of	the matters covered in the said List excluding of course the fees taken in any Court.
The question about the distinction between a tax and a	fee has been considered by this Court in	three decisions in 1954.	In The Commissioner, Hindu Religious	Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1) the vires of the Madras Hindu Religious and Charitable Endowments Act, 1951 (Madras Act XIX of 195 1), came to be examined. Amongst the sections challenged was s. 76(1).
Under this section every religious institution had to pay to the Government annual contribution not exceeding 5% of	its income for the services rendered to it by the	said Government; and the argument was that the contribution	thus exacted	was not a fee but a tax and as such	outside	the competence of the State Legislature. In dealing with	this argument Mukherjee, J., as he then was, cited the definition of tax given by Latham, C.J., in the case of Matthews	(2), and has elaborately considered the distinction between a tax and a fee. The learned judge examined the scheme of the Act and observed that "the material fact which negatives	the theory of fees in the present case is that the money raised by the	levy of the	contribution is not earmarked or specified for defraying the expense that the Government	has to incur in performing the services. All the collections go to the consolidated fund of the State and all the expenses have to be met not out of those collections but out of	the general	revenues by a proper method of appropriation as is done in the (1) [1954] S.C.R. 1005.
547 case of other Government expenses". The learned judge no doubt added that the said circumstance was not conclusive and pointed out that in fact there was	a total absence of any co-relation between the	expenses incurred by	the Government and the amount raised by contribution. That is why s. 76(1) was struck down as ultra vires.
The same point arose before this Court in respect of	the Orissa	Hindu Religious Endowments Act, 1939, as amended by amending Act 11 of 1952 in Mahant Sri Jagannath Ramanuj	Das v. The, State of Orissa (1). Mukherjea, J., who again spoke for the Court, upheld the validity of s. 49 which imposed the liability	to pay the specified contribution on every Mutt or temple having an annual income exceeding Rs. 250 for services rendered by the State Government. The scheme of the impugned Act was examined and it was noticed that	the collections made under it are not merged in	the general public	revenue and are not appropriated in the manner	laid down for appropriation of expenses	for other public purposes. They go	to constitute	a fund	which is contemplated by s. 50 of the Act, and this fund to which the Provincial Government contributes both by way of loan	and grant is specifically	set apart for the rendering of services involved in carrying out the provisions of the Act.
The same view was taken by this Court in regard to s. 58 of the Bombay Public Trust Act, 1950 (Act XXIX of 1950) which imposed a similar contribution for a	similar	purpose in Ratilal	Panachand Gandhi v. The State of Bombay (2).	It would thus be seen that the tests which have to be applied in determining the character of any impugned levy have	been laid down by this Court in these three decisions; and it is in the	light of these tests that we have to consider	the merits	of the rival contentions raised before	us in	the present petition.
On behalf of the petitioners Mr. Amin has relied on three other decisions which may be briefly considered. In P. P.
Kutti Keya v. The State of Madras (3), the Madras High Court was called upon to consider, inter (1) [1954] S.C.R. 1046.	(2) [1954] S.C.R. 1055.
548 alia, the validity of s. 11 of the Madras Commercial Crops Markets	Act 20 of 1933 and Rules 28(1) and 28(3) framed thereunder. Section 11(1) levied a fee on the sales of commercial crops within the notified area and s. 12 provided that the amounts collected by the Market Committee shall be constituted into a Market Fund which would be utilised	for acquiring a site for the market, constructing	a building, maintaining the market and meeting the expenses of	the Market	Committee. The argument that these provisions amounted to services rendered to the notified area and	thus made the levy a fee and not a tax was not accepted by the Court.	Venkatarama Aiyar, J., took the view that the funds raised from the merchants for a construction of a market in substance amounted to an exaction of a tax. Whether or	not the construction of a market amounted to a service to	the notified area	it is	unnecessary for us to consider.
Besides, as we have already pointed out we have now three decisions of this Court which have authoritatively dealt with this matter, and it is in the	light of the	said decisions that the present question has to be considered.
In Attorney-General for British Columbia v. Esquimalt	and Nanaimo Railway Co. (1), the Privy Council had to deal	with the validity of forest protection impost levied by	the relevant section of the Forest Act R. S. B. C.	1936.	The lands in question were statutorily exempted from taxation, and it was urged against the validity of the impost that the levy of the said impost was not a service charge but a	tax;
and since it contravened the exemption from taxation granted to the	land it was invalid. This plea was upheld by	the Privy	Council. The	Privy Council	did consider	two circumstances which were relevant; the first that the	levy was on a defined class of interested individuals, and	the second	that the fund raised did not fall into	the general mass of the proceeds of taxation but was applicable for a special	and limited purpose.	It was conceded	that these considerations	were relevant but the Privy Council thought that the weight to be attached to them should not be exagge- (1) (1950) A.C. 87.
540 rated.	In appreciating the weight of	the said relevant circumstances the Privy Council was impressed by the	fact that the lands in question formed an important part of	the national wealth of	the Province	and their proper administration, including in particular protection against fire, is a matter of high public concern' as well as one of particular interest to individuals. In other	words,	the effect	of the impugned provision was, that the expenses of what was the public service of the greatest importance	for the Province as a whole had been divided between the general body of tax. payers and those individuals who had a special interest in having their property protected. It would	thus appear	that this decision proceeded on the basis that what was claimed to be a special service to the lands in question was in reality an item in public service itself, and so	the element of quid pro quo was absent. It is true that	when the Legislature levies a fee for rendering specific services to a specified area or to a 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 distinctly and primarily meant for the benefit of a specified class or area the	fact that in benefiting the specified class or area the State as a whole may ultimately and indirectly be benefited would not detract	from the character of the levy as a fee. Where, however, the specific service is indistinguishable from pub- lic service, and in essence is directly a part of it, diffe- rent considerations may arise. In such a	case it is necessary to enquire what is the primary object of the	levy and the essential purpose which it is intended to achieve.
Its primary object and the	essential purpose must be distinguished from its ultimate or incidental	results or consequences. That is the true test	in determining	the character of the levy.
In Parton. v. Milk Board (Victoria)(1), the validity of	the levy imposed on dairymen and owners of milk depots by s. 30 of the Milk Board Act of 1933 as amended by subsequent	Acts of 1936-1939 was (1) (1949) 80 C.L.R. 229.
70 550 challenged, and it was held by Dixon, J., that the levy of the said contribution amounted to the imposition of a	duty of excise. This decision was substantially based on	the ground	that the statutory board "performs no particular service	for the dairyman or the owner of a milk depot	for which his contribution may be considered as a fee or recompense" that is to say the element of quid pro quo	was absent	qua the persons on whom the levy had been imposed.
Let us now examine the scheme of the impugned Act. As	the preamble shows	it has been passed because it	was thought expedient to constitute mining areas and a Mining Areas Development Fund in the State of Orissa. It consists of 11 sections. Section 3 of the Act	provides for	the constitution of a mining area whenever it appears to	the State Government that	it is necessary and expedient to provide	amenities like communications, water-supply	and electricity for the better development of any area in	the State of Orissa wherein any mine is situated, or to provide for the welfare of the residents or to workers in any	such areas within which persons employed in a mine or a group of mines reside or work. Under this	section	the State Government has	to define the limits of the area. and is given the power to include within such area any local	area contiguous to	the same or to exclude from such area	any local area comprised therein; that is the effect of s. 3(1).
Section 3(2) empowers the owner or a lessee of a mine or his duly constituted representative in the said area to	file objections in respect of any notification issued under s.
3(1) within the period specified, and the State Government is required to take the said objection into consideration.
After considering objections received the State Government is authorised to issue a notification constituting a mining area under s. 3(3). Section 4 deals with the imposition and collection of cess. The rate of the levy authorised shall not exceed 5 per centum of the valuation of the minerals at the pit's mouth. Section 5 provides for the constitution of the Orissa Mining Areas Development 551 Fund. This fund vests in the State Government and has to be administered by such officer or officers as may be appointed by the	State	Government in	that, behalf Section	5(2) requires that there shall be paid to the credit of the	said fund the proceeds of the cess recovered under s. 4 for	each mining area during the quarter after deducting expenses, if any, for collection and recovery. Section 5(3) contemplates that to the credit of the said fund shall be	placed	all collections of cess under s. 5(2) as well as amounts	from State Government and	the local authorities	and public subscriptions specifically given for any of the purposes of the fund. Section 5(4) deals with the topic of the appli- cation	of the said fund. The fund has to be	utilised to meet expenditure incurred in connection with such measures which in the opinion of the State Government are necessary or expedient for providing amenities like communications, water supply and electricity, for the better development of the mining areas, and to meet the welfare of the labour	and other persons	residing or working in	the mining areas.
Section	5(5) lays down that	without prejudice to	the generality of	the foregoing provisions the fund may be utilised to defray any of the purposes specified in cls. (a) to (e). Under s. 5(6) the State Government is given	the power to decide whether any particular expenditure is or is not debitable to the fund and their decision is made final;
and s. 5(7) imposes on the State Government an obligation to publish	annually in the gazette a report of the activities financed from the fund together with an estimate of receipts and expenditure of the fund and a statement	of account.
Section	6 prescribes the mode of constituting	an advisory committee. It has to consist of such number of members	and chosen in such manner as may be prescribed, provided however that each committee shall include representatives of mine- owners	and workmen employed in mining industry. The names of the members of the committee are required to be published in the gazette. Section 7 deals with the appointment	and functions of the statutory authorities to carry out	the purpose	of the Act,	while s. 8 confers on the State Government power to 552 make rules. Section 9 prescribes penalties and provides for prosecutions; and s. 10 gives protection to the specified authorities or	officers in respect of anything done or intended to be done by them in good faith in pursuance of the Act or any rules or order made thereunder.	Section	11, which is the last section confers on the State Government the power to do anything which may appear to	them to be necessary for	'the purpose of removing difficulties in giving effect to the provisions of the Act.
The scheme of the Act thus clearly shows that it has	been passed for the purpose of the development of mining areas in the State. The basis for the operation of the Act is	the constitution of a mining area, and it is in regard to mining areas thus constituted that the provisions of the Act	come into play. It is not difficult to appreciate the intention of the State Legislature evidenced by this Act. Orissa is an underdeveloped State in the Union of India though it	has a lot	of mineral wealth of great potential value.	Un- fortunately its mineral wealth is located generally in areas sparsely populated with bad communications. Inevitably the exploitation of the minerals is handicapped	by lack of communications,	and the difficulty experienced	in keeping the labour force sufficiently healthy and in congenial surroundings.	The mineral development of	the State, therefore, requires that provision should be made	for improving the communications by constructing good roads	and by providing means of transport such as tramways; supply of water and electricity would also help. It would also be necessary to provide	for amenities	of sanitation	and education to the labour force in order to attract workmen to the area. Before the Act was passed it appears that	the mine-owners tried to put up small-length roads and tramways for their own individual purpose, but that obviously could not be as effective as roads constructed by the State	and tramway	service provided by it. It- is on a consideration of these factors that the State Legislature decided to	take an active part in unsystematic development of	its mineral areas which would help the mine-owners in moving their 553 minerals quickly through the	shortest route and would attract	labour	to assist the excavation of the minerals.
Thus there can be no doubt	that the primary and	the principal object of the Act is to develop' the mineral areas in the State	and to assist more efficient and extended exploitation of its mineral wealth.
The constitution of the advisory committee as prescribed by s. 4 emphasises the fact that the policy of the Act would be to carry out with the assistance of the mine-owners	and their workmen.	Thus after a mining area is	notified an advisory committee is constituted in respect of it, and	the task of carrying out the objects of the Act is left to	the care of the	said advisory committee subject to	the provisions of the Act.	Even before an area is notified	the mine-owners are allowed an opportunity to put forward their objections. These features of the Act are also relevant in determining the question as to whether the Act is intended to render service to the specified area and to the class of persons who are subjected to the levy of the cess.
Section 5 shows that the cess levied does not become a	part of the consolidated	fund and is not subject to	an appropriation in that behalf; it goes into the special	fund earmarked for carrying out the purpose of the Act, and	thus its existence establishes a correlation between the cess and the purpose for which it is levied. It was probably	felt that some additions should be made to the special fund,	and so s.	5(3) contemplates that grants from	the State Government and local authorities and public subscriptions may be collected for enriching the said fund. Every year a report	of the activities financed by the fund	has to be published together with an	estimate of receipt	and expenditure and a statement of accounts. It would thus be clear that the administration of the fund would be subject to public scrutiny and persons who are called upon to	pay the levy would have an opportunity to see whether the	cess collected from	them has been properly utilised for	the purposes for which it is intended to be used.	It is	not alleged by the petitioners 554 that the levy imposed is unduly or unreasonably excessive so as to	make the imposition	a colourable exercise	of legislative power. Indeed the fact that the accounts	have to be published from year to year affords an indication to the contrary.	Thus the scheme of the Act shows that	the cess is levied against the class of persons owning mines in the notified area and it is levied to enable the State Government to render specific services to the said class by developing the notified mineral area.	There is an element of quid pro quo in the scheme, the	cess collected is constituted into a specific fund and it has not become a part of the consolidated fund, its application is regulated by a statute and is confined to its purposes, and there is a definite co-relation between the impost and the purpose of the Act which is to render service to the notified area.
These features	of the Act impress	upon the levy	the character of a fee as distinct from a tax.
It is, however, urged that the cess levied by s. 4(2) is in substance and reality a duty of excise.	As we have already noticed s. 4(2) provides that the rate of such	levy shall not exceed 5 per centum of the valuation of the minerals at the pit's mouth; in other words it is the value of	the minerals produced which is the basis for calculating	the cess payable by mine-owners, and that precisely is	the nature	in which duty of excise is levied under Entry 84 in List I. The said Entry empowers Parliament to impose duties of excise, inter alia, on goods manufactured or produced in India.	When minerals are produced from mines and a duty of excise	is intended to be imposed on	them it would be normally imposed at the pit's mouth, and that is precisely what the impugned Act purports to do. It is also contended that the rate	prescribed by s. 4(2)	indicates that it operates not as a mere fee but as a duty of excise.	This argument must be carefully examined before the character of the cess is finally determined. It is not disputed	that under Entry 23 in List II read with Entry 66 in the	said List the State Legislature can levy a fee in	respect of mines and mineral development.	Entry 23 reads thus: "Regu- lation of Mines and mineral development subject to 555 the provisions	of List I with respect	to regulation	and development under the control of the Union". We will deal with the condition imposed by the latter part of this Entry later.	For the present it	is enough to	state	that regulation of mines and mineral development is	within	the competence of the State Legislature. Entry 66 provides that fees in respect of any of the matters in the said List	can be imposed by the State Legislature subject of course to the exception of fees taken in any Court. The argument is	that though	the State Legislature is competent to levy a fee in respect	of mines and mineral development, if	the statute passed	by a State Legislature in substance and in effect imposes	a duty of excise it	is travelling	outside its jurisdiction and is trespassing on the legislative powers of Parliament.
This argument	is based on two considerations.	The first relates	to the form in which the levy is imposed, and	the second	relates to the extent of the levy authorised.	The extent	of the levy authorised would always depend upon	the nature	of the	services intended to be rendered and	the financial obligations	incurred thereby. If the services intended to be rendered to the notified mineral areas require that a fairly large cess should be collected and co- relation can be definitely established between the proposed services and	the impost levied, then it	would	be unreasonable to suggest that because the rate of the levy is high it is not a fee but a duty of excise. In the present case, if the development of the mining areas involves	con- siderable expenditure	which necessitates the levy of	the prescribed rate it only means that	the services being rendered to the mining areas are very valuable and the rate- payer in substance is compensating	the State for	the services rendered by it to him. It is significant that	the petitioners do	not seriously suggest	that the services intended to be rendered are a cloak and not genuine, or that the taxes levied have no relation to the said services, or that they are unreasonable and excessive. Therefore, in our opinion, the extent of the rate allowed to be imposed by s.
4(2) cannot by itself alter the character of the levy from a 556 fee into that	of a duty of excise.	If the	co-relation between the levy and the services was not genuine or real, or if	the levy was disproportionately higher than	the requirements of the services intended to be	rendered it would have been another matter.
Then as to the form in which the impost is levied, it is difficult to appreciate how the method adopted by	the Legislature in recovering the impost can	alter	its character. The character of the levy must be determined in the light of the tests to which we have already referred.
The method in which the fee is recovered is a matter of convenience, and by itself it cannot fix upon the levy	the character of the duty of excise. This question has often been considered in the past, and it has always been	held that though the method in which an impost is levied may be relevant in determining its character its significance	and effect cannot be exaggerated. In Balla Ram v. The Province of East Punjab (1) the Federal Court had to consider	the character of the tax levied by s. 3 of the Punjab Urban Immoveable Property 'tax Act XVII of 1940.	Section 3 provided as follows: "There shall be charged, levied	and paid an annual to tax on buildings and lands situated in the rating areas shown in the schedule to this Act at such rate not exceeding twenty per centum of the annual value of	such buildings and	lands as the Provincial	Government may by notification in official gazette direct in respect of	each such rating area". The argument urged before	the Federal Court was that the tax imposed by the said section was in reality	a tax on income within the meaning of Item 54 in List I of the Seventh Schedule to the Constitution Act of 1935, and as such it was not covered by Item 42 in List II of the	said Schedule.	This argument was rejected on	the ground	that the tax levied by the Act was in pith	and substance a tax on lands and buildings covered by Item	42.
557 the ground that it had adopted the same basis	for leaving the impost as	the Income-tax Act and the	said basis determined its character whatever may be the appearance in which the impost was purported to be levied. In repelling this argument Fazl Ali, J.	observed that	the crucial question to be answered was whether	merely	because	the Income-tax Act has adopted the annual value as the standard for determining the income it must necessarily follow	that if the same standard is employed as a measure for any other tax that tax becomes a tax on income.	The learned judge then proceeded to add that if the answer to this question is to be	given in the affirmative then certain	taxes which cannot	possibly be described as income-tax must be held to be so.	In other words, the effect of this decision is	that the adoption of the standard used in	Income-tax Act	for getting at the income by any other act for levying the	tax authorised by it would not be enough to convert the said.
tax into an income-tax.	During the course of this judgment Fazl Ali, J. also noticed with approval a similar view taken by the Bombay High Court in Sir Byramjee Jeejeebhoy v.	The Province of Bombay (1).
This decision	has been expressly approved by the Privy Council in Governor-General in Council v. Province of Madras (2). Consistently with the decision of the Federal Court their Lordships expressed the opinion that "a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods and not on sales or the proceeds of the sale of goods.	The two taxes, the one levied on the manufacturer in respect of his goods and the other on the vendor in respect of his sales may in one sense overlap, but in law there is no overlapping; the taxes are separate and distinct imposts.
If in,	fact they overlap that may be	because	the taxing authority imposing a duty of excise finds it convenient to impose that duty at the moment when the excisable article (1) I.L.R. 1940 Bom. 58.
71 558 leaves	the factory or workshop for the first time on	the occasion of its sale". In that case the question	was whether the tax authorised by the Madras General Sales	Tax Act, 1939, was a tax on the sale of goods or was a duty of excise, and the Privy Council held it was the former and not the latter. Therefore, in our opinion, the mere fact	that the levy imposed by the impugned Act has adopted the method of determining	the rate of the levy by reference to	the minerals produced by the mines would not by itself make	the levy a	duty of excise. The method thus adopted may be relevant in considering the character of the impost but	its effect	must be weighed along with and in the light of	the other relevant	circumstances.	In this connection it is always	necessary to bear in mind that	where	an impugned statute	passed	by a State Legislature is relatable to an Entry in List II it is not permissible to challenge	its vires only on the ground that the method adopted by it	for the recovery of the impost can be and is generally adopted in levying a duty of excise. Thus considered the conclusion is inevitable that the cess levied by the impugned Act is neither a tax nor a duty of excise but is a fee.
The next question which arises is, even if the cess is a fee and as such may be relatable to Entries 23 and 66 in List II its validity is still open	to challenge because	the legislative competence of the State Legislature under Entry 23 is subject to the provisions of List I with	respect to regulation and development under the control of the Union;
and that takes us to Entry 54 in List I. This	Entry reads thus: "Regulation of mines and mineral development to	the extent	to which such regulation and development under	the control of the Union is declared by Parliament by law to be expedient-in the public interest". The effect	of reading the two Entries together is clear. The jurisdiction of	the State	Legislature under Entry 23 is subject to	the limitation imposed by the latter part of the said Entry. If Parliament by	its law has declared that regulation	and development of mines should in public interest be under	the control of the Union, to 559 the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central	Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act the impugned	Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter	part of Entry 23 is a limitation on the	legislative competence of (,he State Legislature itself. This position is not in dispute.
It is	urged by Mr. Amin that the field covered by	the impugned Act has already been covered by the Mines	and Minerals (Regulation and Development) Act, 1948, (LIII of 1948) and he contends that in view of the declaration	made by s. 2 of this Act the impugned Act is ultra vires.	This Central	Act was passed to provide for	the regulation of mines and oil fields and for the development of minerals.
It may	be stated at this stage that by Act LXVII of	1957 which has been subsequently passed by Parliament, Act	LIII of 1948 has now been limited only to oil fields. We	are, however, concerned with the operation of the said Act in 1952, and at that time it applied to mines as well as	oil fields.	Section 2 of the Act contains a declaration as to the expediency and control by the Central Government.	It reads thus: "It is hereby declared that it is expedient in the public interest that the Central Government should	take under its control the regulation of mines and oil fields and the development of minerals	to the	extent hereinafter provided". It is common ground that at the relevant	time this Act applied to coal mines. Section 4	of the	Act provides that	no mining lease shall be granted after	the commencement of this Act otherwise than in accordance	with the rules made under this Act. Section 5 empowers	the Central	Government to	make rules by notification	for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral or in	any area. Sections 4 and 5 thus 560 purport to prescribe necessary conditions in accordance with which mining leases have to be executed. This part of	the Act has no relevance to our present purpose. Section 6 of the Act, however, empowers the Central Government to	make rules by notification	in the	official gazette for	the conservation and development of minerals. Section 6(2) lays down several matters in respect of which rules can be framed by the Central Government. This power is, however, without prejudice to the generality of powers conferred on	the Central Government by s. 6(1).	Amongst the matters covered by s. 6(2) is the levy and collection of royalties, fees or taxes in respect of minerals mined, quarried, excavated or collected. It	is true that no rules have in fact	been framed	by the Central Government in regard to the levy	and collection of any fees; but, in our opinion, that would not make any difference. If it is held that this Act contains the declaration referred to in Entry 23 there would be no difficulty in holding that the declaration covers the field of conservation and development of minerals, and the	said field is indistinguishable from the field covered by	the impugned Act.	What	Entry 23 provides is	that	the legislative competence of the State Legislature is subject to the provisions of List I with respect to regulation	and development under the control of the Union, and Entry 54 in List I	requires a declaration by Parliament by law	that regulation and	development of mines should be under	the control of the Union in public interest. Therefore, if a Central Act has been passed for the purpose of providing for the conservation and development of minerals,	and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject-matter covered by the said declaration.	In order that the declaration should be effective it is	not necessary that rules should be made or enforced; all	that this required	is a declaration by Parliament	that it is expedient in the public interest to take the regulation	and development of	mines under the control of the	Union.	In such a case the test must be whether the	legislative declaration covers the field 561 or not.	Judged by this test there can be no doubt that	the field covered by the impugned Act is covered by the Central Act LIII of 1948.
It still remains to consider whether s. 2 of the said	Act amounts in law to a declaration by Parliament as required by Art. 54. When the said Act was passed in 1948	the legislative powers of	the Central and the	Provincial Legislatures were governed by the relevant Entries in	the Seventh Schedule to the Constitution Act of 1935. Entry 36 in List I corresponds to the present Entry 54 in List I. It reads thus: "Regulation of Mines and Oil Fields and mineral development to	the extent to which such regulation	and development under Dominion control is declared by Dominion law to be expedient in public interest". It would be notic- ed that the	declaration required by Entry 36 is a declaration by Dominion law. Reverting then to s. 2 of	the said Act it is clear that the declaration contained in	the said section is put in the passive voice; but in the context there would be no difficulty in holding that the	said declaration by	necessary implication	has been made by Dominion law.	It is a declaration contained in a section passed	by the Dominion Legislature' and so it	is obvious that it is a declaration by a Dominion law; but the question is: Can this	declaration by a Dominion law	be regarded constitutionally as declaration by Parliament which is required by Entry 54 in List I.
It has	been urged before us	by the	learned Additional Solicitor-General and	Mr. Amin that in dealing with	this question we should bear in mind two general considerations.
The Central Act has been continued under Art. 372(1) of	the Constitution as an existing law, and the effect of the	said constitutional provision must be that the continuance of the existing law would be as effective and to the	same extent after the Constitution came into force as before. It is urged that after the said Act was passed and before the Con- stitution came into force no Provincial Legislature could have validly made a law in respect of the field covered by the said Act, and it would be commonsense to assume that the effect of the continuance of the 562 said law under Art. 372(1) cannot be	any different.	In other words, if no Provincial Legislature	could	have trespassed on the field covered by the said Act before	the Constitution, the position would and must be the same	even after the Constitution came into force.
It is also contended that for the purpose of bringing	the provision of existing laws into accord with the provisions of the Constitution the President was given power to make by order appropriate adaptations and modifications of	such laws, and the object of making such adaptations obviously was to	make the continuance of the existing	laws fully effective. It	is in the light of	these	two general considerations,	so the. argument runs, must the point in question be considered. The relevant clause in	the Adaptation of Laws Order, 1950, on which reliance has	been placed	in support of	this argument	is el.	16 in	the Supplementary Part of the said Order. This clause provides that subject to the provisions of this Order any reference by whatever form of	words in any existing	law to	any authority competent at the date of the passing of that	law to exercise any powers or authorities, or to discharge	any functions, in any part of India shall, where a corresponding new authority has been constituted	by or	under	the Constitution, have effect until duly repealed or amended as if it	were a	reference to	that new authority.	The petitioners contend that as a result of this	clause	the declaration made by the Dominion Legislature in s. 2 of	the Central	Act must now be held to be the declaration made by Parliament. Is this contention justified on	a fair and reasonable construction of the clause?	That is the crux of the problem.
In considering this question it would be relevant to recall the scheme of	the Adaptation of Laws Order, 1950.	It consists of Three Parts. Part 1 deals with the adaptation of Central Laws and indicates the adaptation made therein;
Part 11 deals with the adaptation of Provincial Laws	and follows	the same pattern; and Part III is a Supplementary Part which contains	provisions in the	nature	of supplementary	provisions. A	perusal of the clauses contained in Part 563 I would show that though some adaptation was made in	Act LIII of 1948	it was not thought necessary	to make an adaptation in s. 2 of the said Act whereby the	declaration implied in the said section has been expressly adapted	into a declaration by Parliament.
Now, the effect of el. 16 in substance is to equate an authority competent at the date of the passing of	the existing law to exercise any powers or authorities, or to discharge any functions with a corresponding new authority which has been constituted by or under the Constitution.
Reference to the authority in the con. text would suggest cases like reference to the Governor-General eo nomine, or Central Government which respectively would be equated	with the President	or the Union Government. Prima facie	the reference to authority would not include reference to a Legislature; in this connection it may be relevant to point out that Art. 372(1) refers to a competent Legislature as distinguished from other competent authorities.	That is the first difficulty in holding that el. 16 refers to	the Dominion Legislature and purports to equate it with	the Parliament.
It is clear that for the application of this clause it is necessary that	a reference should have been made to	the authority by some words whatever may be their form.	In other words it is only where the existing	law refers expressly to some authority that this clause can be invoked.
It is difficult to construe the first part of this clause to include	authorities to which no reference is made by	any words in terms, but to which such reference may be implied;
and quite clearly the Dominion Legislature is not expressly referred to in s. 2. In construing the present clause we think it would be straining the language of the clause to hold that an authority to which no reference	is made by words in any part of the existing law could claim	the benefit of this clause.
Besides, there is no doubt that when the clause refers to any authority	competent to	exercise any	powers	or authorities, or to discharge any functions, it refers to the powers,	authorities or functions attributable to	the existing law itself; that is to say, authorities 564 which are competent to exercise powers or to discharge functions under the existing laws are intended to be equated with corresponding new authorities. It is impossible to hold that the Dominion Legislature is an authority which was competent to exercise any power or to discharge any function under the existing law. Competence to exercise power to discharge functions to which the clause refers	must inevitably be	related to the existing law and not to	the Constitution Act of 1935 which would be necessary if Dominion Legislature was to be included as an authority under this clause. The Constitution Act of 1935 had	been repealed by the Constitution and it was not, and could	not obviously be, the object of the Adaptation of Laws Order to make any adaptation in regard to the said Act.	Therefore, the competence of the Dominion Legislature which flowed from the relevant provisions of the Constitution Act of 1935 is wholly	outside this clause. We have carefully considered the arguments	urged before us by the	learned Additional Solicitor-General and	Mr. Amin but we are unable to	hold that cl. 16 can be pressed into service for the purpose of supporting the	conclusion that the	declaration by	the Dominion Legislature implied in s. 2 of Act LIII of	1948 can, by virtue of cl. 16, be held to be a declaration by Parliament within the meaning of the relevant Entries in the Constitution.	If that be the true	position then	the alternative challenge to the vires of the Act based on	el.
16 of the Adaptation of Laws Order must fail.
There is another possible argument which may	prima facie lead to the same conclusion. Let us assume that the result of reading Art. 372 and cl. 16 of the Adaptation of	Laws Order is that under s. 2 of Act LIII of 1948	there is a declaration by Parliament as suggested by the	petitioners and the learned Additional Solicitor-General.	Would	that meet the requirements of Entry 54 in List I of the Seventh Schedule? It is difficult to answer this question in	the affirmative because	the relevant provisions of	the Constitution are prospective	and the declaration	by Parliament specified by Entry 54 must be declaration made by 565 Parliament subsequent to the date when the Constitution came into force. Unless a declaration is	made by Parliament after the Constitution came into force it will not satisfy the requirements of Entry 54, and that inevitably would mean that the impugned Act is validly enacted under Entry 23 in List II of the Seventh Schedule. If	that be the	true position then it would follow that even on the assumption that el. 16 of the Adaptation of Laws Order and Art. 372 can be construed as suggested by the petitioners the impugned Act would be valid.
Faced with this difficulty, both the	learned Additional Solicitor-General and	Mr. Amin argued that cl. 21 of	the said Order may be of some assistance. Clause 21 reads thus:
"Any Court, Tribunal, or authority required or empowered to enforce	any law in force in the territory of India immediately before the appointed day shall, notwithstanding that this Order makes no provision or insufficient provision for the adaptation of the law for the purpose of bringing it into accord with the	provisions of	the Constitution, construe the law with all such adaptations as are necessary for the said purpose".	Assuming that this clause is valid we do not see how it is relevant in the present case.	All that this clause purports to do is to empower the Court to construe the law with such adaptations as may be necessary for the purpose of bringing it in accord with the provisions of the	Constitution.	There is no occasion to make	any adaptation in construing Act LIII of 1948 for	bringing it into accord with the provisions of the Constitution at	all.
The said Act has been continued under Art. 372(1) and there is no	constitutional	defect	in the	said Act for	the avoidance of which any adaptation is necessary. In	fact what the petitioners seek to do is to read in s. 2 of	the said Act the declaration by Parliament required by Entry 54 so as to make the impugned Act ultra vires. Quite clearly cl. 21 cannot be pressed into service for such	a purpose.
Therefore, we reach this position that the field covered by Act LIII of 1948 is substantially the same as the field covered by the 72 566 impugned Act but the declaration made by s. 2 of the	said Act does not	constitutionally amount to the requisite declaration by Parliament, and so the limitation imposed by Entry 54 does not come into operation in the present case.
Act LIII of 1948 continues in operation under Art. 372; with this modification that so far as the State of Orissa is concerned it is the impugned Act that governs and not	the Central	Act.	Article	372(1) in fact provides for	the continuance of	the existing	law until it	is altered, repealed or amended by a competent Legislature or other competent authority.	In the absence of the requisite parliamentary declaration the legislative competence of	the Orissa Legislature under Entry 23 read with Entry 66 is	not impaired, and so the said Legislature is competent either to repeal, alter or amend the existing law which is the Central Act LIII of 1948; in effect, after the impugned Act	was passed,	so far as Orissa is concerned the Central Act must be deemed to be repealed. This position is fully consistent with the provisions of Art. 372. The result is that	the material words used in cls. 16 and 21 being unambiguous	and explicit, it is difficult to give effect to the two general considerations	on which reliance has been placed by	the petitioners. Incidentally the present case discloses	that in regard to	the requisite parliamentary	declaration prescribed by Entry 54 in List I in its application to	the pre-Constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of	Laws Order;	that, however,	is a	matter	for Parliament	to consider.
There is one more point which is yet to be considered.	Mr.
Amin contends	that Entry 23 in List II is subject to	the provisions in	List I	with respect	to regulation	and development under the control of the Union, and according to him Entry 52 in List I is one of such provisions. In	this connection he	relies on the said Entry which	deals	with industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest, and Industries (Development and Regulation) Act, 1951 (LXV 567 of 1951). This Act has been passed to provide for	the development and regulation of certain	industries one of which undoubtedly is coal mining industry. Section 2 of this Act declares that it is expedient in	the public interest that the Union should take under its	control	the industries specified	in the First Schedule.	This declaration is a declaration made by Parliament, and if	the provisions of the Act read with the said declaration covered the same field as is covered by the impugned Act, it would undoubtedly affect the vires of the impugned Act; but in dealing	with this question it is important to bear in	mind the doctrine of pith and substance. We have already noticed that in pith and substance the impugned Act is concerned with the development of the mining areas notified under	it.
The Central Act, on the other hand, deals more directly with the control of all industries including of	course	the industry of coal. Chapter II of this Act provides for	the constitution of the Central Advisory Council and Development Councils, chapter III deals with the regulation of scheduled industries, chapter IIIA provides for the direct management or control of industrial undertakings by Central Government in certain cases, and chapter IIIB is concerned with	the topic of control of supply, distribution, price, etc, of certain articles. The last chapter deals with miscellaneous incidental matters. The functions of the	Development Councils constituted under this Act prescribed by s.	6(4) bring out the real purpose and object of the Act. It is to increase the efficiency or productivity in the scheduled industry or group of scheduled industries, to	improve or develop	the service that such industry or group	of industries renders or could render to the community, or to enable	such industry or group of industries to render	such service	more	economically.	Section	9 authorises	the imposition of cess on scheduled industries in certain cases.
Section	9(4) provides that the Central Government may	hand over the proceeds of the cess to the	Development Council there specified and that the	Development Council shall utilise	the said proceeds to achieve the objects mentioned in cls. (a) to (d). These 568 objects	include the promotion of scientific and industrial research, of improvements in design and quality, and	the provision for the training of technicians and labour in such industry or group of industries. It would thus be seen that the object of	the Act is to regulate the scheduled industries with a view to improvement and development of the service that they may render to the society, and thus assist the solution of the larger problem of national economy.	It is difficult to hold	that the field covered by	the declaration made by s. 2 of this Act,	considered in	the light of its several provisions, is the same as the field covered	by the impugned Act. That being so, it cannot be said that as a result of Entry 52 read with Act LXV of 1951 the vires of	the impugned	Act can be	successfully challenged.
Our conclusion, therefore, is that the impugned Act is relatable to Entries 23 and 66 in List II of	the Seventh Schedule, and its validity is not impaired or	affected by Entries	52 and 54 in List I read with Act LXV of 1951	and Act LIII of 1948 respectively.	In view of this conclusion it is unnecessary to consider whether the impugned Act	can be justified under Entry 50 in List II, or whether it is relatable to Entry 24 in List III and as such suffexs	from the vice of repugnancy with the Central Act XXXII of 1947.
The result is	the petition fails and	is dismissed	with costs.
WANCHOO, J.-I have read the judgment just delivered by my learned brother Gajendragadkar J. and regret that I have not been able to persuade myself that the cess levied in	this case on all extracted minerals from any mine in any mining area at a rate not exceeding five per centum of the value of the minerals at the	pit's mouth by the Orissa State Legislature under s.	4 of	the Orissa Mining Areas Development Fund Act, No. XXVII of 1952, (hereinafter called the Act) is a fee properly so called and not a duty of	ex- cise.	The facts are all set out in	the judgment	just delivered and I need not repeat them.
The scheme of the Act, as appears from s. 3 thereof is to give power to the State Government, whenever it 569 thinks it necessary and expedient to provide amenities, like communications, water-supply and electricity for the better development of any area in the State where-, in any mine is situated or to provide for the welfare of residents or workers in any such area within. which persons employed in a mine or a group of mines reside or work, to constitute	such an area to be a mining area for the purposes of the Act, to define	the limits of the area, to include within such	area any local area contiguous to the same and defined in	the notification and to exclude from such area any	local	area comprised therein and	defined in the notification. A notification under s. 3 is made, after	hearing objections from owners or lessees of mines. After such an area is con- stituted under	s. 3, a cess is imposed under s. 4 on	all extracted minerals from any mine in any such area at	the rate not exceeding five per centum of the value of	the minerals at the pit's mouth.	The cess so collected is credited to a fund called the Orissa Mining Area Development Fund created under s. 5 of the Act, besides other amounts with which we are not concerned in this case. The Fund is to be	applied to meet expenditure incurred in connection with such measures, which in the opinion of the State Government, are necessary or expedient for providing amenities like communications, water-supply and electricity, for the better development of mining areas and to meet	the welfare	of labour and other persons residing or working in the mining areas. Then come other provisions	for working out the above provisions including s. 8, which gives power to the State Government to frame rules to carry. into effect the purposes of the Act. The Rules were framed under	the Act in January, 1955.
The constitutional competence of	the Orissa State Legislature to levy the cess under the Act is	attacked on two main grounds. In the first place, it is urged that	the cess is in pith and substance a duty of excise under item 84 of List I of the Seventh Schedule and therefore the levy of such a	cess is beyond the competence of the Orissa State Legislature. In the second place, it is urged that even if the cess is a fee, in view 570 of the two Acts of the Central Legislature and	Parliament, namely, The Mines and Minerals (Regulation and	Development) Act, No. LIII of 1948 and The Industries (Development	and Regulation) Act, No. LXV of 1951, the Orissa Legislature was not competent to pass the Act.
The petition has been opposed on behalf of the State of Orissa and the main contentions urged on its behalf are that the cess is a fee properly so called and not	a duty of excise	and therefore	the Orissa State Legislature	was competent to levy it and the two Central Acts do not affect that competence. In the alternative it has been urged	that even if the cess is a tax the State Legislature	was competent to levy it under item 50 of List If of the Seventh Schedule.
The first question therefore that falls for consideration is whether	the cess in	this' ease is	a tax	or a	fee.
Difference between a	tax properly so	called	and a	fee properly so called came up for consideration	before	this Court in three cases in 1954 and was considered at length.
In the	first	of them, namely, The	Commissioner, Hindu Religious Endowments,	Madras v. Sri	Lakshmindra Thirtha Swamiar of Sri Shirur Mutt it was pointed out that- "though	levying of fees is only a particular form of	the exercise of the taxing power of the State, our	Constitution has placed fees under a separate category for	purposes of legislation and at the end of each one of the three legislative lists, it has given a power to the particular legislature to	legislate on the imposition of fees in respect	to every one of the items dealt with in the	list itself".
It was also pointed that- "the essence of a tax is compulsion, that is to say, it is imposed under statutory power without the taxpayer's consent and the payment is	enforced by	law.	The second characteristic of a tax is that it is an imposition made for public	purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when (1) [1954] S.C.R. 1005.
571 collected forms part of the public revenues of	the State.
As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax-payer and the public authority. Another feature of taxation is that as it is a part of the common burden, quantum of imposition upon	the tax-payer depends generally upon his capacity to pay." As to fees, it was pointed out that- "a 'fee' is generally defined to be a charge for a special service rendered to individuals by some governmental agency.
The amount of fee levied is supposed to be based on	the expenses incurred by	the Government	in rendering	the service, though in many cases the costs are	arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay." Finally, it was pointed out that- "the distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special	benefit or privilege............... Public interest seems to be at	the basis of all impositions, but in a fee it is some special benefit which the individual receives." The consequence of these principles was that- "if, as we hold, a fee is regarded as a sort of return or consideration for services rendered,	it is	absolutely necessary that the levy of fees should, on the face of	the legislative provision be co-related to the expenses incurred by Government in rendering the	services............... If the money thus paid	is set apart	and	appropriated specifically for the performance of such work and is	not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax." Having laid down these principles, that case then considered the vires of	s. 76 of the Madras Hindu Religious	and Charitable Endowments	Act, No. XIX of 1951,	and it	was pointed	out that the material fact which negatived	the theory	of fees in that case was that the money raised by levy of the contribution was not ear-marked or specified for defraying the expenses 572 that the Government had to incur in performing the services.
All the collections went to the consolidated fund of	the State and all the expenses had to be met not out of those collections but out of the general revenues by a proper method	of appropriation as was done in the case of other government expenses. That	in itself might not	be conclusive, but in, that case there was total absence of any co-relation between the expenses incurred by the Government and the amount raised by contribution under the provision of s. 76	and in those circumstances the theory of return or counter-payment or quid pro quo could not have any possible application to that case. Consequently, the	contribution levied under s. 76 was held to be a tax and not a fee.
In the second case of Mahant Sri Jagannath Ramanuj Das v.
The State of Orissa (1), a similar imposition by the Orissa Legislature came up for consideration.	After referring to the earlier case, it was pointed out that- "two elements are thus. essential in order that a payment may be regarded as a fee. In the first place, it must be levied	in consideration of certain	services which	the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a	fee, if the payments demanded for rendering of such services	are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes." The Orissa imposition	was held to be a fee	because	the collections made were	not merged in	the general public revenue	and were meant for the purpose of	meeting	the expenses of the Commissioner and his office which was	the machinery set up for due administration of the	affairs of the religious institution. They went to constitute a	fund which was contemplated by s. 50 of the Orissa Act and	this fund was specifically	set apart for	rendering services involved in carrying out the provisions of the Act.
573 v. The State of Bombay (1) came from Bombay.	Sec. 58 of the Bombay Act, No. XXIX of 1950, provided for an imposition in proportion to the gross annual income of the trust.	This imposition was levied for the purpose of due administration of the	trust property and for defraying the expenses incurred in connection with the same.	After referring to the two earlier cases, the Court went on to say that- "taxis	a common burden and the only return which	the taxpayer gets is participation in the common benefits of the State.	Fees, on the other hand, are payments primarily in the public interest, but for some special service rendered or some special work done for the benefit of those from whom the payments are demanded. Thus in fees there is always an element of quid pro quo which is absent in a	tax.........
But in order that the collections made by the Government can rank as fees, there must be co-relation between the	levy imposed and the expenses incurred by the State for	the purpose of rendering such services." It was then pointed out that the contributions, which were collected under s.	58, were to be credited in the Public Trusts Administration Fund as constituted	under s. 57. This fund was to	be applied exclusively for the	payment	of charges for expenses incidental to	the regulation of public trusts and	for carrying into	effect	the provisions	of the Act.	The imposition therefore was in that case held to be a fee.
These decisions clearly bring out the difference between a tax and a fee and generally speaking there is always an element of quid pro quo in a fee and	the amount raised through	a fee is co-related to the expenses necessary	for rendering the services which are the basis of quid pro	quo.
Further, the amount collected as a fee does	not go to augment the general revenues of the State and many a time a special fund is created in which fees	are credited-though this is not absolutely necessary. But as I read these deci- sions, they cannot be held to lay down that 'What is in pith and substance a tax can become a fee merely (1) [1954] S.C.R. 1055.
574 because a fund is created in which collections are credited and some services may be rendered to the persons from	whom collections are made. If that were so, it will be possible to convert many taxes not otherwise leviable into fees by the device of creating a special fund and attaching	some service to be rendered through that fund to the persons from whom collections are made. I am therefore of opinion	that one must first look at the pith and substance of the levy, and if	in its pith and substance it	is not	essentially different from a tax it cannot be converted into a fee by creating a special fund in	which the collections are credited and attaching some services to be rendered through that fund.
Let me	then look at the pith and substance of the cess, which has been imposed in this case. The cess consists of a levy not exceeding five per centum of the value of	the minerals at the pit's mouth on all	extracted minerals.
Prima facie such a levy is nothing more nor less than a duty of excise. Item 84 of List I gives power to levy duties of excise exclusively to the Union and is in these terms :- "Duties of excise on tobacco and other goods manufactured or produced in India except- (a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and	other narcotic	drugs	and narcotics, but including medicinal and toilet	preparations containing alcohol or	any substance	included in	sub- paragraph (b) of this entry." This item gives power to Parliament to impose duties of excise on all goods manufactured. or produced in India	with certain	exceptions mentioned therein. Taking	this particular case, coal is produced from the mine and would clearly	be covered by the words " other goods	produced in India" and a duty of excise can be levied on it. What	then exactly	is meant by a duty of excise?	Reference in	this connection may	be made to Governor-General in	Council v.
Province of Madras (1). In that case the	point arose whether the sales-tax imposed by the Madras Legislature	was a duty of excise. The Privy Council pointed out that-- (1) (1945) L.R. 72 I.A. 91.
575 "in a Federal constitution in which there is a division of legislative powers between	Central and	Provincial legislatures, it appears to be inevitable that	controversy should	arise whether	one or	other	legislature is	not exceeding its	own, and encroaching	on the other's, constitutional legislative power, and in such a	controversy it is a principle, which their Lordships do not hesitate to apply in the present case, that it is not the name of	the tax but its real nature, its 'pith and substance' as it	has sometimes been said which must determine into what category it falls." The Privy Council went on to consider what a duty of excise was and said that- "it is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax	on goods not on sales or the proceeds	of sale of goods.	Though sometimes a duty of excise may be imposed on first sales, a duty of excise and a tax on the sale of goods were separate	and distinct imposts and in	law do	not overlap." The Privy Council approved of the decisions of the Federal Court in re The Central Provinces and Berar Sales of Motor Spirit and Lubricants	Taxation Act,	1938 (1) and	The Province of Madras v. Messrs. Boddu Paidanna and Sons	(2).
It seems to have been urged that because in some cases a duty of excise may be levied on the occasion of the first sale and a sales tax may also be levied on the	same occasion, there is really no difference between the two. It is however clear that a duty of excise is primarily a tax on goods manufactured or produced; it is not a tax on the	sale of goods, though the taxing authority may as a matter of concession to the producer not charge the tax	immediately the goods are produced and may postpone it, to make it	easy for the producer to pay the tax, till the first sale is made by him; nevertheless the charge is still on the goods and is therefore a duty of excise. On the other hand, a sales	tax can only be levied when a sale is made and there is nothing to prevent its levy on the first sale.	The two concepts (1) (1939) F.C.R. 18.	(2) (1948) F.C.R. go.
Let me therefore see what the Orissa Legislature has done in the present case. It has levied a cess at	a rate	not exceeding five per centum on the value of minerals at	the pit's mouth on all extracted minerals.	All the extracted minerals are nothing other than goods produced and the	cess is levied on the goods produced at a rate not exceeding five per centum of	the value at the pit's mouth. The	cess therefore in the present case cannot be anything other	than a duty	of excise. The pith and substance of the cess in this case falls fairly and squarely within entry 84 of	List I and is therefore a duty of excise, which cannot be levied by the Orissa State Legislature. I may in this connection refer to the cesses levied by the Central Legislature	and Parliament by Act XXXII of 1947 and by the Act No. LXV of 1951.	Sec. 3 of Act XXXII of 1947 lays down	that there shall be levied and collected as a cess for the purposes of that Act a duty of excise on all coal and coke dispatched from collieries at such rate not less than four annas	and not more than eight annas per ton as may from time to	time be fixed by the Central Government by notification in	the Official Gazette. This is obviously a tax on the goods produced, the basis of the tax being so much per ton. Again sec. 9 of Act LXV of 1951 lays down that there may be levied and collected as a cess for the purposes of that Act on	all goods manufactured or	produced in any such scheduled industry as may be specified in this behalf by the Central Government by notified order a duty of excise at a rate	not exceeding two annas per centum of the value of	the goods.
This again is clearly a tax on goods produced	or manufactured and is in the nature of a duty of excise,	the basis of the tax being so much of the value of	the goods.
It is however urged that the method employed in the Act	for realising the cess is only a method of quantification of the fee and merely because of this quantification, the pith	and substance of the impost does not change from a fee to a duty of excise. Reference in this connection was made to three cases of quantification. In Sir Byramjee Jeejeebhoy v.	The Province of Bombay (1), a question arose with respect to a tax imposed on urban immovable property, whether it was a tax on lands and buildings. The challenge to the tax was on the ground that it was tax on income or capital value within items 54 and 55 of List I of the Seventh Schedule of	the Government of India Act and could not therefore be imposed by the Bombay Legislature. It was held that the tax was a tax on lands and buildings within the meaning of item 42 of List II of the same Schedule and that the basis of the	tax, which was the annual value, would not convert it into a	tax on income or capital value. The High Court considered	the pith and substance of the said Act and came to	the conclusion that every tax on annual value was	not necessarily a tax on income and it was held that the mode of assessment of a tax did not determine its character and	one has to look to the essential character of the tax to decide whether	it was a tax on income or on lands and buildings.
Looking to the pith and substance of the tax it was held in that case that it was a tax on lands and buildings.	That decision was in the circumstances of that case right because the intention of the legislature was not to tax the income of any one; the essential character of the tax in that	case was to tax the lands and buildings and the annual value of the lands and buildings was only taken as a mode of levying the tax. In the present case, however, the very mode of the levy of the cess is nothing other than the levy of a duty of excise	and therefore the principle of	quantification	for purposes of a fee cannot be extended to (1) I.L.R. 1940 Bom. 58.
The next case	to which reference was	made is Municipal Corporation, Ahmedabad v. Patel Gordhandas Hargovandas	(1).
In that case the Ahmedabad Bo. rough Municipality had levied a rate on open lands and the basis of the levy was one	per centum of the capital value of the land. It was urged	that this amounted to a capital levy within entry 54 of List I;
but the court repelled that contention and held that	the levy was in pith and substance a tax on lands,	which	came within	entry 42 of List II of the Seventh Schedule to	the Government of India Act. A distinction was made between a tax on	land which is levied on the basis of	its capital value and a tax which is on capital treating it as an asset itself.	This decision also, if I may say so with respect, is correct, for the basic idea was to tax lands and	some method had to be found for doing so and the method evolved, though	it might look like a capital levy, was in pith	and substance not so. But the theory of quantification which is the basis of these two cases cannot be stretched so far as to turn levies which are in pith and substance	taxes	into fees, by the	process of attaching certain services	and creating a fund.
The third case is Ralla Ram v. The Province of East Punjab (2). That was a case of a tax on lands and buildings	and annual value was the basis on which the tax was levied.	The Federal	Court	rightly	pointed out that the pith	and substance of the levy had to be seen and on that view it was not income-tax	but a tax on lands and	buildings and	the method	adopted was merely a method of quantification.	The Federal	Court	also pointed out that "where there is an apparent conflict between an Act of the Federal	Legislature and an	Act of the Provincial Legislature, we must try to ascertain the	pith and substance or the true nature	and character of the conflicting provisions and that before an Act is declared ultra vires, there should be an attempt to reconcile the two conflicting jurisdictions, and, only if such a reconciliation should prove (1) I.L.R. 1954 Bom. 41.
579 impossible, the impugned Act should be declared invalid." It may also be pointed out that in all these three cases,	one source of income of an individual or one item out of	the total capital of an individual was the basis of	calculation while income-tax or capital levy is generally on the total income	or the total capital of a person. That aspect	must have gone into the decision that the method employed	was merely a mode for imposing a tax on lands and buildings. In the present case, however, I see no difference between	the method of imposing a duty of excise and the method employed in the Act for imposing a cess-a matter which will be clear from the cesses imposed under the two Central Acts already referred to (No. XXXII of 1947 and No. LXV of 1951). It is not as	if there could be no method	of imposing a	fee properly so called in this case except the one employed.
Two methods readily suggest themselves. A lump sum annual fee could be levied on each mine even on a graded scale depending on the size of the mine as evidenced by its share capital. Or a similar graded fee could be levied on	each mine depending on its size determined by the number of	men employed therein. Where therefore the	result	of quantification	is to bring a	particular impost entirely within the ambit of a tax it would not be right to say	that such an impost is still a fee, because certain services have to be	rendered and a fund has been created in which collections of	the impost are credited. If this	were permissible many taxes not otherwise	leviable would be converted into	fees by the simple device of	creating a special	fund and attaching certain services to be rendered from the amount in that fund. That would in my opinion be a colourable exercise of the	power of legislation,	as explained in K. C. Gajapati Narayan Deo v. The State of Orissa (1). Let me illustrate how taxes can be turned	into fees on the so-called basis of quantification with the	help of the	device	of creating a fund and attaching certain services to be rendered out of monies in the fund. Take the case of income-tax under item 82 of List I of	the Seventh Schedule, which is exclusively reserved (1) [1954] S.C.R. 1.
580 for the Union.	Suppose that some State Legislature wants to impose a tax on income other than agricultural income in the garb of fees.	All that it has to do is then to create a special	fund out of the amounts collected and to attach rendering of certain services to the fund. All that would be necessary would be to define the services to be rendered so widely that the amount required for the purpose would be practically limitless.	In that case there would be no difficulty in levying any amount of tax on income, for	the amount collected would always be insufficient for the large number	of services to be rendered. What has to be done is to find out a number of items in Lists II and III of	the Seventh	Schedule in respect of which fees can be levied by the State Legislature.	These fees can be levied on a total basis for a large number of services under various entries of Lists II and III.	A fund can be	created, say,	for rendering services of various kinds to residents of	one district. In order to meet the expenses of tendering	such services, suppose, the legislature imposes a tax on every one in the district at 10 per centum of the net total income (other than agricultural income); the amount so collected is put in	a separate fund and ear-marked for such special services to be rendered to the residents of that district.
Can it	be said that such a levy is a fee justified under various	entries of Lists II and III, and not a tax on income, on the ground that this is	merely	a mode of quantification?	As an instance, take, item 6 of List	II, "Public health and sanitation, hospitals and dispensaries";
item 9, "Relief of the disabled and unemployable"; item	II, Education; item 12,	Libraries, museums and similar institutions"; item 13, communications, that	is to	say, roads,	bridges and other means of communications; item	17, "Water,	that is to say, water supplies, irrigation	and canals,	drainage and embankments, water storage and water power"; and item', 25, "Gas and gas-works"; item 23 of	List III, "Social security and social insurance, employment	and unemployment";	item 24, "Welfare of labour including conditions of work, provident funds, employers' liability workmen's compensation, invalidity and old age 581 pensions and maternity benefits"; item 25, "Vocational	and technical training of labour"; and item 38, "Electricity".
Assume that a fund is created for rendering, these services to the residents of a district. The State Legislature is entitled to impose fees for rendering these services to	the residents of the district; the costs of these services would obviously be limitless and in order to meet these costs, the State legislature levies a consolidated fee for all these purposes at 10 per centum of the total net income on	the residents of the district (excluding his	agricultural income)	as a measure of quantification of the fee. Can it be said in the circumstances that such a levy would not be Income-tax, simply because a fund is created to be used in the district where collections are made and these services have to be rendered out of the fund	so created to	the residents of that district and to no others? The answer can only be one, viz., that the nature of the impost is to be seen in its pith and substance; and if in pith and substance it is	income-tax within item 82 of List I of	the Seventh Schedule it will still remain income-tax in spite of	the creation of a fund and the attaching of certain services to the monies in that fund to be rendered in a particular area.
Such an impost can never be justified as a consolidated	fee on the ground that it is merely a method of quantification.
Compare what has been done in this case. Sec. 3 of the	Act which refers to the	services to be rendered mentions communications, that is,, roads, bridges and other means of communication (barring those given in List I),	water-supply and electricity, for the better development of the area.
These three items themselves would mean expenditure of	such large amounts	that anything could be charged as a fee to meet the costs, particularly in an undeveloped	State	like Orissa.	Further, the section goes on to mention provision for the welfare of residents or workers in any	such area, which would include such things as social security	and social	insurance, provident-funds, employer's liability, workmen's compensation, invalidity and old age pensions	and maternity benefits and may	be even employment	and unemployment. Again large funds would 74 582 be required for these purposes. Therefore, the services enumerated in s. 3 being so large and requiring such large sums, any amount can be levied as a fee and in the name of quantification any tax, even though it may be in List I, can be imposed; and that is exactly what has been done, namely, what is really a duty of excise has been imposed as a	fee for these purposes which fall under items 13 and 17 of	List II and 23, 24 and 38 of List III. There can be no doubt in the circumstances that the levy of a cess as a fee in	this case is a colourable piece of legislation. I do not	say that the Orissa State Legislature did	this deliberately.
Looking	at that, the cess in this case is in pith	and substance nothing other than a duty of excise under item 84 of List I and therefore the State legislature	was incompetent to levy it as a fee.
The next contention on behalf of the State of Orissa is that if the	cess is not justified as a fee, it is a tax under item 50 of List II of the Seventh	Schedule. Item 50 provides for taxes on mineral rights subject to	any limitations imposed by Parliament by law relating to mineral development. This raises a question as to what are taxes on mineral rights.	Obviously, taxes on mineral rights must be different from	taxes on goods produced in the nature of duties	of excise. If taxes on mineral rights also include taxes on minerals produced, there would be no difference between	taxes on mineral rights and duties of excise under item 84 of List I. A comparison of Lists I and II of	the Seventh Schedule shows that the same tax is not put in both the Lists. Therefore, taxes on mineral rights must be different from duties of excise which are taxes on minerals produced. The difference can be understood if one sees that before minerals are extracted and become liable to duties of excise somebody has got to work the mines. The usual method of working them is for the owner of the mine to grant mining leases to those who have got the capital to work the mines.
There should 583 therefore be no difficulty in holding that taxes on mineral rights	are taxes on the right to extract minerals and	not taxes on the	minerals actually extracted. Thus tax on mineral	rights would be confined, for example, to taxes on leases of mineral rights and on premium or royalty for that.
Taxes on such premium and royalty would be taxes on mineral rights while taxes on the minerals actually extracted would be duties of excise. It is said that, there may be cases where the owner himself extracts minerals and does not	give any right of extraction to somebody else and that in	such cases in the absence of mining leases or sub-leases there would be no way of levying tax on mineral right,-,. It is enough	to say that these cases also, rare though they	are, present	no difficulty. Take the case of taxes on annual value of buildings. Where there is a lease of the building, the annual value is determined by the lease-money; but there are many cases where owners themselves live in buildings.
In such cases also taxes on buildings are levied on	the annual	value worked out according to certain rules. There would be no difficulty where an owner himself works the mine to value the mineral rights on the same principles on which leases	of mineral rights are made and then	to tax	the royalty	which,	for example, the owner might have got if instead of working the mine himself he had leased it out to somebody else.	There can be no doubt therefore that taxes on mineral rights are taxes of this nature and not taxes on minerals actually produced. Therefore the present case is not a	tax on mineral rights; it is a tax on the minerals actually produced and	can be no different in pith	and substance from	a tax on goods produced which	comes under Item 84 of List I, as duty of excise.	The present	levy therefore under s. 4 of the Act cannot be justified as a tax on mineral rights.
In the view I have taken, it is not necessary	to consider the other point, raised on behalf of the	petitioners, namely, that even if it is a fee, in view of the two Central Acts (mentioned earlier) the, Orissa Legislature was	not competent to pass the Act. I would 584 therefore allow the petition, and declare that	the Orissa Mining	Areas Development Fund Act, 1952, is	beyond the constitutional competence of the Orissa Legislature to	pass it. The whole Act must be struck down because there will be very little left in the Act if s. 4 falls as it must.	The legislature would never have passed the Act without s. 4.
By COURT. In accordance with the majority Judgment of	the Court, the Writ Petition is dismissed with costs.