Fees And Taxes

Fees and taxes, 'Fees' are the amounts paid for a privilege, and are not an obligation, but the payment is voluntary. Fees are distinguished from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpose, while a fee may be charged for the privilege or benefit conferred, or service rendered or to meet the expenses connected therewith. Thus, fee are nothing but payment for some special privilege granted on service rendered. Taxes and taxation are, therefore, distinguishable from various other contributions, charges, or burdens paid or imposed for particular purposes and under particular power or functions of the Government, Southern Pharmaceuticals and Chemicals v. State of Kerala, AIR 1981 SC 1863: (1981) 4 SCC 391: (1982) 1 SCR 519.

The distinction between fees and taxes, although sometimes ascribed to Rau, is really much older. Adam Smith already speaks of certain expenses 'which are laid out for the benefit of the whole society'. 'It is reasonable, therefore', he adds 'that they should be defrayed by the general contribution of the whole society, all the different members contributing as nearly as possible in proportion to their respective abilities'. These, as he afterward explains, are taxes. On the other hand, he speaks of certain outlays, as for justice, for 'person who give occasion to this expense'. The expenditure, therefore, he thinks, 'may very property be defrayed by the particular contribution of these persons', that is, by fees of court. And he extends this principle to tolls of roads and various other expenses, Commissioner, Hindu Religious Endowments, Madras v. Lakshmindra Thirtha Swamiar of Shirur Mutt, 1954 SCR 1005 (1006, 1042): AIR 1954 SC 282: 1954 SCJ 335.