R.K. Batta, J.
1. The issue involved in these petitions, is same and as such it is proposed to dispose of both the writ petitions by a common Judgment.
2. In both the writ petitions, there is a challenge to the validity of provisions of Section 9A of the Bombay Money Lenders Act, 1946 (hereinafter called as 'the said Act') as amended by Maharashtra Act No. 7 of 1992 which, according to the petitioners, is ultra vires with the provisions of the Constitution insofar as it seeks to levy inspection fee on the money lenders. Petitioners, therefore, seek striking down of Section 9A of the said Act. Consequently, the petitioners also sought quashing of the Demand Notice for payment of inspection fee.
3. We may refer to some facts in Writ Petition No. 3469/93 which are more comprehensive. Petitioners therein are carrying money lending business and hold money lending licence issued under the provisions of the said Act. This petition gives history of incorporation of Section 9A and states that, for the first time, Section 9A in respect of levy of inspection fee was introduced by Bombay Act No. 50 of 1959 which came into force on 26-9-1959. The first amendment to Section 9A was made by Maharashtra Act No. 76 of 1975 which came into force from 26-7-1976. Ultimately, Section 9A was amended by Maharashtra Act No. 7 of 1992 which came into force from 28-4-1992. The amended provisions of Section 9A with -which we are concerned in this petition are as under :
'9A. Levy of inspection fee.--(1) An inspection fee shall, in addition to the licence fee leviable under Section 6, be levied from a money lender applying for a renewal of a licence at the rate of one per cent of the maximum capital utilised by him during the period of the licence sought to be renewed or rupees five thousand, whichever is lesser.
(2) In default of payment of an inspection fee leviable under Sub-section (1), it shall be recoverable from the defaulter in the same manner as an arrears of land revenue.
Explanation: For the purposes of this section, 'maximum capital' means the highest total amount of the capital sum which may remain invested in the money lending business on any day during the period of a licence.'
Rule 11 of the Bombay Money Lenders Rules, 1959 (hereinafter called as 'the said Rules') deals with the levy of inspection fees and it reads as under :
'11. Levy of inspection fee.--(1) On receipt of an application for the renewal of a licence, the Assistant Registrar to whom the application has. been made, shall call upon the applicant to produce his accounts for inspection. He shall then assess the inspection fee payable under Section 9-A in respect of inspection of books of accounts and call upon the applicant to pay the inspection fee in the manner prescribed in Rule 10. The inspection fee shall be paid within ten days of the receipt of the order in this behalf by the applicant or within such further period not exceeding thirty days in the aggregate of the receipt of the order as the Registrar may grant in that behalf.
(2) The Registrar may suo motu or on an application made in that behalf revise the order of assessment made under sub-rule (1) if he thinks fit.'
According to the petitioners, inspection fee is payable when the licence is to be renewed and the charge of inspection fee @ 1% of the maximum capital utilised by the money lender during the period of licence sought to be renewed or Rs. 5,000/- whichever is less. The term maximum capital has been explained in the explanation to Section 9A to mean highest amount of capital sum which may remain invested in the money lending business on any day during the period of a licence. Therefore, according to the petitioners, amount of inspection fee differs from money lender to money lender and depends upon the utilisation of maximum capital on any day during the period of a licence. It is further pointed out that the money lenders are required to maintain Books of Account under Section 18 of the Act read with Rules 16 and 17 of the Rules. Section 18 of the Act deals with duty of Money Lender to keep accounts and maintain cash book and a ledger in such form and in the manner as may be prescribed as also to furnish copies to debtors as well as Assistant Registrar. The section also provides that upon repayment of loan in full, make entries of payment and discharge every mortgage, restore every pledge, return every note and cancel or reassign every assignment given by the debtor as security for loan. At this stage, it is necessary to refer to Rules 16 and 17 of the Rules which reads as under:
'Rule 16. Forms of cash book, ledger and of statement and receipt under Section 18.--The cash book and ledger to be maintained by a moneylender under Sub-section (1) of Section 18 shall be either in Forms Nos. 4 and 7 respectively or in Forms Nos. 5 and 6 respectively. The statement under Clause (a) of Sub-section (2) of Section 18 shall be in Form No. 8. The receipts under Sub-sections (3) and (4) of Section 18 shall be in Form Nos. 9 and 10 respectively.
Rule 17. Capital Account.--Every money-lender shall open a capital account in Form No. 11 for the purpose of Section 9A.'
All these accounts are required to be verified before grant of renewal of the licence. According to the petitioners, the State Legislature is competent to make laws for such State or any part thereof with respect to any of the matters enumerated in List II of Seventh Schedule to the Constitution and under Entry 66, the Legislature of the State is competent to make laws in respect of fee. Entry 66 reads as under:
'66. Fees in respect of any matters in this list, but not including the fees taken in any Court.'
It is further pointed out that entry 30 of List II is as under :
'30. Money lending and money lenders, relief of agriculturalindebtedness.'
Thus, according to the petitioners, the Legislature of State is competent to make laws prescribing fees in respect of the matters of money lending arid money lenders. It is then urged by the petitioners that under Article 265 of the Constitution, there is a prohibition for imposition or levy or collection of tax by respondents, except by authority of law and that fee can be imposed only in respect of the subjects specified in List II of the Seventh Schedule to the Constitution. Under the List II, Stale Legislature is not empowered to levy any tax in respect of the subject matter of money lending or money lenders. Thus, according to the petitioners, the State Legislature is competent to make laws laying down fees only in respect of the money lending and not the tax. According to the petitioners, it is not open for the respondent State Government to collect any tax under the garb of levying fee. They further urged that though the provisions of Section 9A quoted above, are styled as inspection fee, it is in fact the collection of tax by respondent without any authority of law. Petitioners, then pointed out the difference between the tax and fee and according to them, fees are levied essentially for the 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. Therefore, according to the petitioners, quid pro quo is a must in the ease of fee. According to the petitioners, there is no quid pro quo for imposition of levy of fee and it is in nature of tax which the State Legislature is not competent to impose. The petitioners also alleged that maximum levy of Rs. 5000/- is arbitrary and violative of fundamental rights guaranteed under Article 14 of the Constitution inasmuch as it has no relevance whatsoever to any service and no inspection fee is liable to be imposed or recovered from money lenders when already Section 6 provides for levy of licence fee.
4. The petitioners received notice for payment of inspection fee for the period 1-8-1991 to 31-7-1992. According to them, amendment to Section 9A came into force from 28-4-1992 and by that time more than half of the licence period was already over and the petitioners had already paid fee under unamended Section 9A and as such there is no justification whatsoever to recover the inspection fee retrospectively from 1-8-1991. The petitioners also received Notice of recovery of inspection fee for the year 1992-93 and both these notices have been challenged by the petitioners in this petition.
5. According to the petitioners, the work of inspection is required to be done by the Respondent authority to sec that the terms of licence granted earlier are observed and the accounts required are properly maintained as per the provisions of the Rules. Therefore, there is no question of correlation of the amount of levy either with the inspection fee or licence fee to cost of any service. It is further urged by them that the inspection of books of accounts of money lenders can by no stretch of imagination be considered service rendered to the money lenders either for the grant of licence or for renewal of the same. Therefore, according to the petitioners, levy of licence fee or inspection fee is a lax which Stale Legislature is riot empowered to impose. It is also pointed out that levy of inspection fee is, in fact, a double taxation since money lenders paylicence fee and books of accounts are merely inspected for granting so called renewal of licence. It is further urged by the petitioners that the levy is credited in General Public Funds Account and is not appropriated towards any specific service rendered. It is also urged that the levy is arbitrary and is totally disproportionate to the so-called services rendered.
6. On the basis of the above pleadings, the petitioners seek quashing of both the notices as also declaration that Section 9A of the said Act is ultra vires to the Constitution.
7. The challenges in Writ Petition No. 314/93 are more or less same and, it is, therefore, not necessary to refer to the facts of the said case. Same grounds have been taken in this petition as well.
8. The respondent in Writ Petition No. 314/93 have filed reply wherein it is pointed out that the said Act was enacted to regulate and control money lending business so as to eradicate the malpractices in the money lending business and to protect the interest of the debtors. Thus, according to the respondent, the purpose of the Act is not limited to provide services to the money lenders but it is also regulatory in nature for the protection of the interest of the debtors as well. According to the respondent, the work of the Co-operative Department of the Respondent is to regulate and control the money lending business and to protect the debtors from mal practices in the business by detecting illegal money lending etc.. It is further pointed out that there are various provisions to control and regulate money lending in the said Act. The staff and officers of the Department have to visit the places of money lending business, inspect accounts and other matters relating to the business. According to, the respondent, the strength of the staff looking after the money lending work has been considerably and significantly increased in the recent past and receipts from the inspection fee and licence fee are very meager in the range of Rs. 25 to 30 lacs every year which are not even sufficient to meet the expenses incurred for the staff looking after the money lending business. According to the respondent, inspection fee is charged not only for rendering services but also for regulating and controlling money lending business. The increase in the levy is also justified on the ground that primary motive of regulation is public interest and that since 1981 there is heavy increase in the Pay and Allowance of the Government Servants who arc employed for regulating and controlling the activities under the Act in order to ensure its compliance. The contentions raised by the petitioners that the levy is in the nature of tax or is arbitrary or unconstitutional are all said to be devoid of any substance. Return has also been filed by the respondents in Writ Petition No. 3469/93.
9. We have heard learned Advocates for the petitioners and learned 'A Panel' Counsel for State. The arguments advanced by learned Advocates for the petitioners substantially center around the pleadings and as such it is not necessary to repeat the same in detailed. Shri J.N. Chandurkar, learned Senior Advocate appearing for the petitioners in W. P. No. 314/93 placed heavy reliance on the Judgment of the Apex Court reported in the case of Kewal Krishan Puri and Anr. v. State of Punjab, : [1979]3SCR1217 in support of his submission that quid pro quo is a must in the case of fee. The learned Advocate Shri D. C. Daga appearing in Writ Petition No. 3469/93 also urged before us that there is noquid pro quo in the instant case and the fee is levied under the garb of tax. He also urged that fees are always uniform but in the case under consideration, the fee varies from person to person for which no services are rendered and it is in the nature of tax.
10. Shri A. M. Gordey, learned 'A Panel' Counsel on the other hand after placing reliance on the case of B. S. E. Brokers' forum, Bombay and others v. Securities And Exchange Board of India, 2001 (3) Supreme Court Cases, 482 urged before us that, in fact, the inspection fee is charged for renewal of the licence and for that purpose it is necessary that the records maintained by the money lenders should be thoroughly examined in order to satisfy whether all the registers are maintained properly in accordance with the Rules and it is only after the satisfaction during the inspection that no irregularities are committed, that the money lender is entitled to get the renewal of the licence. He also pointed out that the charges of regulatory fee is permissible and it is not necessary that there should be quid pro quo but the inspection itself of the accounts which is required to be carried before renewal is a service rendered by the Department and without inspection, the licence cannot be renewed. Insofar as the argument relating to t'he uniformity of the fee is concerned, it is urged that the Schedule provides measure for assessing the fee and it depends upon the capital turnover and in case the capital turnover is more, the time spent on inspection is more on account entries thereof in registers, as a result of which the recovery of the inspection fee is provided in the Schedule depending upon the annual turnover. He also pointed out to the various provisions of the Act under which the Government has to exercise the power to monitor and control the activities so as to protect the interest of the debtors which is a primary object of the said Act, which is a piece of social legislation and that in the circumstances it cannot be said that the levy is in the nature of tax but that the levy is, in fact, fee in the circumstances.
11. Section 2(5A) of the Act defines inspection fee as under :
'inspection fee' means the fee leviable under Section 9A in respect of inspection of books of accounts of a money lender.'
Section 2(8) defines licence fee as under:
'licence fee' means the fee payable in respect of a licence.'
Section 6 deals with the application for licence and prescribes licence fee. Section 8 provides for renewal of issue of licence and provides that grant of licence shall not be refused except for the grounds referred therein which includes the grounds that the applicant has not complied with the provisions of the Act or the Rules in respect of the application for grant of licence or that the applicant has made wilful default in complying with or knowingly acted in contravention of any requirement of the Act etc. Section 9A provides for levy of inspection fee and it has already been quoted by us.
12. Rule 11 of the said Rules provides for levy of inspection fee which has already been reproduced above. Rule 16 of the Rules provides for Forms of cash book, ledger and of statement and receipt under Section 18 which has also been reproduced in Para 3 of the Judgment. Rule 17 speaks of capital account and provides that 'Every money lender shall open a capital account in Form No. 11 for the.purposes of Section 9A. In this Form, details relating to the daily transactions are required to be entered. Rule 18 provides for annual statement ofaccounts to be delivered by the money lender to debtor etc. under Section 19(1) of the Act. Rules 19 and 20 deal with supply of statement and pass books. Rule 21 deals with the Notice and information to be given on assignment of loan.
13. From the perusal of the above provisions, it is clear that the renewal of licence is not automatic but the renewal of licence can be refused on the grounds specified in Section 8. In order to ensure that money lender complies with the provisions of the Act and the Rules on which the renewal of the licence can be refused under Clause (b) and (c) of Section 8; inspection of the record maintained by the money lenders are absolutely necessary and must. In this respect. Rule 11 of the said Rules provides that on receipt of any application for renewal of a licence, the Assistant Registrar to whom the application has been made, shall call upon the applicant to produce its account for inspection. He shall then assess the inspection fee payable under Section 9A in respect of the inspection of books of accounts and call upon the applicant to pay the inspection fee in the manner prescribed in Rule 10. Therefore, the inspection of records, by itself, provides for service rendered by the State to the money lenders which is done in connection with their request to renew the licence for which it is necessary to find out that the applicant has complied with the provisions of the Act and Rules and that he has not made any wilful default in complying with or knowingly acted in contravention of any requirements of the Act.
14. Besides this, fee can also be charged, when it is regulatory in nature as also for monitoring, controlling and implementing various provisions of the Act which the authorities are required to ensure in order to achieve the object of the Act that is to say to protect the interest of the debtor. The Act is a piece of social legislation and imposes obligation on the State to ensure that the provisions of the Act and Rules therein are complied with. For this purpose also besides the inspection which is required to be carried out, the State has to maintain machinery.
15. The learned Advocate for the petitioner in W. P. No. 314/93 had placed heavy reliance on the Judgment of the Apex Court in the case of Kewal Krishan Puri and Anr. v. State of Punjab and Anr. (supra). The Apex Court in the case of B. S. E Brokers' Forum, Bombay and Ors. v. Securities and Exchange Board of India and others (supra) after considering a large number of authorities, has observed that a lot of ice has melted in the Himalaya after rendering the earlier Judgments as also there has been a sea change in the judicial thinking as to the difference between a tax and a fee since then. It has been pointed out in the case of Sreenivasa General Traders and others v. State of Andhra Pradesh and Ors., : [1983]3SCR843 that the Judgment in Kewal Krishan Puri v. State of Punjab (supra) is only an obiter. The Apex Court in Sreenivasa General Traders v. State of Andhra Pradesh (supra), after considering the Judgment in Kewal Krishan Puri v. State of Punjab (supra) wherein following propositions have been laid down,
'1. it must be shown with some amount of certainty, reasonableness or preponderance of probability that quite a substantial portion of the amount of fee realised is spent for the special benefit of its payers, (p 1230 G and H (SCC p 425, para 8)
2. .... a fee is levied essentially for services rendered and as such there isan element of quid pro quo between the person who pays the fee and thepublic authority which imposes it. (p. 1232 G)(SCC p.426, para 13)
3.......it (service) means service in relation to the transaction, property orthe institution in respect of which he is made to pay the fee (p. 1233 D) (SCC p 427,para 13),'.
has pointed that with greatest respect the decision in Kewal Krishan Puri's case does not lay down any legal principle of general applicability and these observations are not to be read as Euclid's theorems nor as provisions of a statute and that the same are to be read in the context in which they appear. It has also been pointed out in the said Judgment by the Apex Court that quid pro quo in the strict sense is not always a sine qua mm for a fee, though a reasonable relationship between levy of fee and service rendered must be present. It was further pointed out therein that in determining whether a levy is a fee or not, emphasis must be whether its primary and essential purpose is to render specific services to a specified area or class. It was also pointed out therein that levy does not cease to be a fee merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual service rendered by the authority to each individual who obtains the benefit of the service. It was also pointed out by the Apex Court that merely because the collections for the services rendered or grant of a privilege or licence are taken to the Consolidated Fund of the State and not separately appropriated towards the expenditure for rendering the service is not by itself decisive. It was thus concluded that an element of quid pro quo in the strict sense is not always a sine qua non for a fee. In. Amar Nath Om Parkash and Ors. v. State of Punjab and Ors., : [1985]2SCR72 also the Apex Court has expressed agreement that the observations contained in Kewal Krishan Case (supra) about the extent of fees levied and realised to be spent for justifying quid pro quo are not to be read as Euclid's theorems nor as provisions of a statute and that the observations must be read in the context in which they appear.
16. In State of Maharashtra v. The Salvation Army Western India Territory, : [1975]3SCR475 , the Apex Court examined the question whether supervision and control of public trust which is part of the statutory functions and duties under the Act, could be regarded as special benefit to the public trusts justifying the levy of a fee. The Apex Court has held :
'The object of the Act is to regulate and make better provisions for the administration of public trusts and to see that they are administered in furtherance of their aims and objects. Taking precautionary measures to see that public trusts are administered for the purposes intended by the authors of the trusts and exercising control and supervision with a view to preserve the trust properties from being wasted or misappropriated by trustees are certainly special services for the benefit of the trusts. Therefore, there is no substance in the argument that no special benefits were or are being conferred upon the public trusts in administering the provisions of the Act.'
In this case it was pointed out that the expenditure in constructing buildings for locating the head office and regional offices and the increase in the allowances or other amenities to the staff have also to be included in the costs of the services.
17. The Apex Court in the case of B. S. E. Brokers' Forum Bombay and Ors. v. Securities and Exchange Board of India (supra) has pointed out that in the case of City Corporation of Calicut v. Thachamhaiath Sadasivan and Ors., : [1985]2SCR1008 , a change, that is taking place in judicial thinking as to the difference between tax and fee, has been reflected. In this case, it was held that the judicial concept of quid pro quo in a fee is undergoing transformation, though the fee must have relation to the services rendered, or the advantages conferred, it is not necessary to establish that those who pay the fee must receive direct or special benefit or advantage of the services rendered for which the fee is being paid. It was further held that if one who is liable to pay, receives general benefit from the authority levying the fee, the element of service required for collecting fee is satisfied. The Apex Court also referred to the Judgment in the case of Sirsilk Ltd. v. Textiles Committee and others : AIR1989SC317 wherein it was held that when the entire proceeds of the fee are utilised in financing various projects undertaken by the Textile Committee, it could not be said that there is no reasonable and sufficient correlation between the levy of fee and the services rendered by the Textile Committee. It is pertinent to note that it was further held that when the levy of the fee is for the benefit of the entire textile industry, there is sufficient quid pro quo between the levy recovered and the services rendered to the industry as a whole. The activities of the Textile Committee in furtherance of the object and purpose of the Act are to ensure quality of all textiles whether made wholly or partly of cotton, wool, silk, artificial fibre or silk. The petitioner therein had made a grievance that there is no inspection of the rayon yarn and nylon yarn manufactured by them at the stage of production was belied by the fact that there was a pre-shipment inspection of the fabrics manufactured from such fibres for export. It was held that the provision for the levy of fees for inspection and examination of textiles under Section 12(1)(a) of the Act or the levy of the fee under Rule 21 of the Rules could not be challenged on the ground that there was no reasonable relationship between the levy of the fee and the services rendered by the Committee to the entire Textile Industry.
18. in the case of Commissioner and Secretary to Govl. Commercial Taxes and Religious Endowments Department and Ors. v. Sree Murugan Financing Corporation Coimbatore and Ors., : [1992]2SCR735 , the Apex Court while dealing with T.N.C. Fund Act, 1961 and Rules thereunder noticed that the object of the Act was to protect the interest of subscribers and more the number of subscribers meant more burden on the authorities under the Act and as a consequence more fee was required to meet the expenditure. The said Act and the Rules provide complete mechanism for the control, supervision and regulation of the chit fund business and the levy imposed under the circumstances was considered as regulatory measure since the collection of such funds from such category of people is required to be monitored strictly. Therefore, the enhanced fee was found to be justified.
19. Likewise in the case of Krishi Upai Mandi Samiti and Ors. v. Orient Paper and Industries Ltd., : (1995)1SCC655 , the Apex Court after referring to the various provisions of the M. P. Krishi Upaj Mandi Adhiniyam, 1973 and particular Sections 17, 38, 39, 43 and 44 of the said Act found that the purposes for which the market fee is to be utilised are in furtherance of the object of the Act viz, to regulate the buying and selling of agricultural produce and the establishment and proper administration of markets for agricultural produce for the benefit of the agriculturists who are the primary producers of the said produce. It was held that the machinery and the facilities for which the market fees are expended are all necessary to provide the necessary infrastructure to further the abject of the Act. But for such infrastructure, the objects of the Act cannot be properly and adequately implemented. It was further pointed put that the respondent may not be the direct beneficiary of anyone or some of the facilities or does not make use of them does not absolve it from payment of market fee since the said machinery and the facilities are meant for the benefit of all the buyers and sellers of all the agricultural produce within the market area. Therefore, it was held that it could not be said that the respondent Mills is neither directly nor indirectly a beneficiary of the said machinery and the said facilities as a buyer of the bamboos when the purchase is admittedly made in the market area. In this case after considering conspectus of the Judgment on the subject it has been laid down;
'(1) Though levying of fee is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fee under a separate category for purposes of legislation. At the end of each one of the three Legislative Lists, it has given power to the particular legislature to legislate on the imposition of fee in respect of every one of the items dealt with in the list itself, except fees taken in Court.
(2) The tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered. There is no quid pro quo between the taxpayer and the public authority. It is a part of the common burden and the quantum of imposition upon the tax payer depends generally upon his capacity to Pay.
(3) Fee is a charge for a special service rendered to individuals or a class 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 some 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. These are various kinds of fees and it is not possible to formulate a definition that would be applicable to all cases.
(4) The element of compulsion or coerciveness is present in all kinds of impositions though in different degrees and it is not totally absent in fees. Hence, it cannot be the sole or even a material criterion for distinguishing a tax from fee. Compulsion lies in the fact that payment is enforceable by law against an individual in spite of his unwillingness or want of consent and this element is present in taxes as well as in fees.
(5) The distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of the common burden while a fee is a payment for a special benefit or privilege. Fees confer a special capacity although the special advantage is secondary to the primary motive of regulation in the public interest. Public interest seems to be at the basis of all impositions but in a fee it is some special benefit which is conferred and accruing which is the reason for imposition of the levy. In the case of a tax, the particular advantage if it exists at all, is an incidental result of State action. A fee is a sort of return or consideration for services rendered and hence it is primarily necessary that the levy of fee should on the face of the legislative provision be co-related to the expenses incurred by Government in rendering the services. As indicated in Article 110(2) of the Constitution ordinarily there are two classes of cases where Government imposes fees upon persons. The first is of grant of permission or privilege and the second for services rendered. In the first class of cases, the cost incurred by the Government for granting of permission or privilege may be very small and the amount of imposition levied is based not necessarily upon the costs incurred by the Government but upon the benefit that the individual receives. In such cases, the tax element is predominant. If the money paid by privilege holders goes entirely for the expenses of matters of general public utility, the fee cannot hut be regarded as a tax. In the other class of cases, the Government does some positive work for the benefit of persons and the money is taken as the return for the work done or services rendered.
(6) There is really no generic difference between tax and fee and the taxing power of the State may manifest itself in three different forms viz., special assessments, fees and taxes. Whether a cess is tax or fee would depend upon the facts of each case. If in the guise of 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. In determining whether the levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specific area or classes. It is of no consequence that the State may ultimately and indirectly be benefited by it. The amount of the levy must depend upon 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 tax. Nor can be method prescribed by the legislature for recovering 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.
(7) It is not a postulate of a fee that it must have relation to the actual service rendered. However, the rendering of service has to be established. The service, further, cannot be remote. The test of quid pro quo is not to be satisfied with close or proximate relationship in all kinds of fees. A good and substantial portion of the fee must, however, be shown to be expended for the purpose for which the fee is levied. It is not necessary to confer the whole of the benefit on the payers of the fee but some special benefit must be conferred on them which has a direct andreasonable correlation to the fee. While conferring some special benefits on the payers of the fees, it is permissible to render service in the general interest of all concerned. The element of quid pro quo is not possible or even necessary to be established with arithmetical exactitude. But, it must be established broadly and reasonably that the amount is being spent for rendering services to those on whom the burden of the fee falls. There is no postulate of a fee that it must have a direct relation to the actual services rendered by the authorities to each individual to obtain the benefit of the service. The element of quid pro quo in the strict sense is not always a sine qua non for a fee. The element of quid pro quo is not necessarily absent in every tax. It is enough if there is a broad, reasonable and general correlationship between the levy and the resultant benefit to the class of people on which the fee is levied though no single payer of the fee receives direct or personal benefit from those services. It is immaterial that the general public may also be benefited from some of the services if the primary service intended is for the payers of the fees.
(8) Absence of uniformity is not a criterion on which alone it can be said that the levy is of the nature of a tax. The legislature has power to enact appropriate retrospective legislation declaring levies as fees by denuding them of the characteristics of tax.
(9) It is not necessary that the amount of fees collected by the Government should be kept separately. In view of the provisions of Article 266, all amounts received by the Governments have to be credited to the Consolidated Funds and to the public accounts of the respective Governments.'
20. In the case of Secunderabad Hyderabad Hotel Owners' Association and others, v. Hyderabad Municipal Corporation, Hyderabad and another, : [1999]1SCR143 , the Apex Court while dealing with the question of licence fee at the increased rates under the Hyderabad Municipal Corporation Act, pointed out that the Hotel licence is subject to the conditions setforth in the bye-laws of the Municipal Corporation relating to the regulation of eating houses or hotels mentioned in Section 521. The said conditions are reproduced in the licence. Besides, imposing certain liabilities on the licensee, they require the respondent Municipal Corporation to inspect the premises in question in order to ensure that the conditions are complied with. The respondent is also required to ensure cleanliness, removal of garbage and maintenance of hygiene in those premises. In this context, it was pointed out that the licence fee may be either regulatory or compensatory. The licence fees can be regulatory when the activities for which a licence is given, require to be regulated or controlled and the fee which is charged for regulation of such activity would be validly classifiable as a fee and not a tax although no service is rendered. It was further pointed out that an element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive. In the said case it was found that fees charged were not just for services rendered but had also a large element of a regulatory fee levied for the purpose of monitoring the activity of the licensees to ensure that they comply with the terms and conditions of the licence. The Apex Court also dealtwith the question that it is not necessary that a fee should be only in the form of lump sum fee but a fee can also be graded.
21. In view of the above position of law, we do not find any merit in the contentions advanced by the learned advocate for the petitioners that the inspection fee which is being charged, has either no nexus with the services rendered or that it is in the nature of the tax. As we have already pointed out for the purpose of renewal of the licence, Rule 11 prescribes inspection in order to determine whether the provisions of Section 8 have been duly complied with or not. For this purpose, the machinery is required and unless the inspection is carried out, the licence cannot be renewed. Therefore, actually there is direct service rendered in to the money lenders since the renewal of the licence depends upon the inspection. Besides this, the fees are also regulatory in nature to further the objects of the Act so as to control and supervise the functioning of the money lenders in order to protect the debtors. This exercise is must for fulfilling the purpose of the Act for which infrastructure is required. The State in its return (in W. P. No. 314/93) has stated that there is a heavy increase in the Pay and Allowance of the establishment which is required to enforce the purpose of the Act and receipts from inspection fee and licence fee are meagre which are 'not even sufficient to meet the expenditure incurred on the staff looking after money lending business. This aspect can be taken into consideration in view of the observations made by the Apex Court in para 23 in The State of Maharashtra v. The Salvation Army, Western India Territory (supra). The levy has been increased after so many years. The fee in question is thus also regulatory in nature so as to control and supervise the working under the Act.
22. The learned Advocate for the petitioner (in W. P. No. 3469/93) has stated that the inspection fee is credited in the General Public Funds Account. This contention does not seem to be correct since the challan Annexure 'C at page 36 which is annexed, shows that the money is credited under the Head 'Cooperation--Money Lending Act - Fees'. The stamp is not clearly visible because even the budget head has also been given there. The true translation of the Annexure-C which is given and is at page 36 A does not even refer to this stamp. Therefore, there is no merit in this submission of the petitioner in the said writ petition. Besides this, the Apex Court in Sreenivasa General Traders v. State of Andhra Pradesh (supra) has laid down that merely because of collection of services rendered or grant of a privilege or licence are taken to the Consolidated Fund of the Stale and not separately appropriated towards the expenditure for rendering the service is not by itself decisive.
23. The contention of learned Advocate for the petitioner that the fee has to be uniform is without any merit in view of the Judgment of the Apex Court in Secunderabad Hyderabad Hotel Owners' Association and Ors. v. Hyderabad Municipal Corporation, Hyderabad (supra). It has pointed out by the Apex Court in State of Maharashtra v. The Salvation Army, Western India Territory (supra) that fees are ordinarily uniform but absence of uniformity is not a criterion on which alone it can be said that a levy is in the nature of tax.
24. Learned Advocate for respondents has rightly urged that Schedule of fees provides measure for assessing the fees depending upon capital turnover. The Apex Court in B.S.E. Broker' Forum, Bombay and Ors. v. Securities andExchange Board of India (supra) in para 45 has dealt with this aspect. It was found that it can not be disputed that the 'Annual Turnover' of a borrower is not the subject matter of levy but it is only a measure for levy. The Apex Court has relied on its earlier Judgment in Goodricke Group Ltd. v. State of West Bengal : 1995(50)ECC138 wherein it was pointed out that income or yield of land/building is merely taken as measure of the tax but it does not alter the nature or character of the levy.
25. The next point which is urged by the petitioners in Writ Petition No. 3469/93 is that at any rate the inspection fee could not be charged for the period 1-8-1991 to 31-7-1992 since the amendment came into force from 28-4-1992 by which time more than half of the licence period had expired. We may at this stage refer to the explanation to Section 9A which provides that for the purpose of this section, maximum capital means the highest total amount of the capital sum which may remain invested in the money-lending business on any day during the period of a licence. Therefore, highest total amount of capital sum which may remain invested in the money lending business on any day during the period of licence is required to be considered. Though, the petitioners have stated that the inspection fee is demanded for the period 1-8-1991 to 31-7-1992, the same does not appears to be correct, in view of Annexure-A which states that while renewing the licence for 1992-93, the inspection fee was deposited at the old rate whereas for the purpose of renewal of the licence for the period 92-93 the inspection fee was to be recovered at the revised rate on the basis of the money lending transaction during the period 1-8-1991 to 31-7-1992. It is further pointed out in the said Notice at Annexure-A that during the inspection it was noticed that during the period 1-8-1991 to 31-7-1992 maximum capital in the money lending business was Rs. 4,12,320/- and, therefore, the revised inspection fee of Rs. 4124/- as per the revised rates were required to be paid whereas the inspection fee of only Rs. 500/- was paid. The petitioner was, therefore, directed to pay difference of inspection fee for the year 1992-93 at Rs. 3624/-. Besides this the amendment came into force with effect from 28-4-1992 during the currency of period 1-8-1991 to 31-7-1992 and as such at any rate highest total amount of capital sum could be taken into consideration for assessing inspection fee for renewal of licence for the year 1992-93 in view of explanation to Section 9A of the Act. Therefore, there is no merit in the submission of the petitioner.
26. For the aforesaid reasons, we do not find any merit in the challenge of the petitioners as to the validity of Section 9A as amended of the said Act on any of the grounds advanced in the petition. Accordingly both the petitioner are hereby dismissed. Rule is accordingly discharged. Stay granted on 8-2-1994 in W. P. No. 3469/93 is vacated. The respondents shall be entitled to recover the difference of the inspection fee which may be due from the petitioner.