Holding

The mutation levy, though termed a fee, is in substance a tax aimed at revenue generation, and its ad‑valorem, discriminatory rates are ultra vires and violate Article 14.

Summary

The Calcutta Municipal Corporation demanded mutation fees, calculated on an ad‑valorem basis and varying with property value and the cause of transfer, from developers who had purchased land and sought to change the name in the municipal assessment books. The developers challenged the levy, arguing that it was labelled a fee but in substance a tax, arbitrary, discriminatory and violative of Article 14 and beyond the authority of Section 183(5) of the Calcutta Municipal Corporation Act. The Supreme Court examined the nature of the charge, distinguishing between fees (regulatory, police power) and taxes (revenue‑raising) and noted that mutation is a fiscal inquiry aimed at tax collection, not a special service. It held that the levy’s primary purpose was revenue generation, the ad‑valorem rates and differential treatment were irrational and discriminatory, and therefore the charge was a tax ultra vires the statute. Consequently, the corporation’s appeal against the High Court’s decision was dismissed, leaving the levy invalid.

Issues considered

Whether the mutation charge imposed under the Calcutta Corporation (Taxation) Regulations, 1989 is a fee (regulatory) or a tax (revenue‑raising).
Whether the ad‑valorem, variable rates for mutation constitute arbitrary and discriminatory classification violative of Article 14 of the Constitution.
Whether the levy exceeds the statutory power conferred by Section 183(5) of the Calcutta Municipal Corporation Act, 1986 (as amended).

Legislation cited

Constitution of Indias. 14, s. 246, s. 366

Subjects

taxfeemunicipal corporationmutationArticle 14discriminationregulatory powerpolice powertaxationconstitutional law

Judgment

A CALCUTTA MUNICIPAL CORPORATION AND ORS.
v.
M/S. SH REY MERCANTILE PVT. LTD. AND ORS.

MARCH 9, 2005

B [S.N. VARIA VA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.]

Calcutta Municipal Corporation Act, 1986 (as amended by Calcutta
Municipal Corporation (Amendment) Act, 1988)-Section 183-Calcutta
C Corporation (Taxation) Regulations, 1989-Schedule-Mutation fee-,Demand
of-Charging on ad valorem basis, at different rates depending on value of
property and cause of transfer-Nature and validity of charging-Held: Levy
is in the nature of 'tax' and not 'fee', its primary object being augmenting
revenue and not being regulatory measure-The levy is irrational, arbitrary,
discriminatory violative of Article 14 of the Constitution and beyond Section
D 183(5) of the Act-Constitution of India, 1950-Article 14:
Tax' and 'Fees' -Meaning of and difference between.

Section 183 of Calcutta Municipal Corporation Act, 1981 was
amended by Calcutta Municipal Corporation (Amendment) Act, 1988. In
E terms of the Amendment Act, the Corporation enacted Calcutta
Corporation (Taxation) Regulations, 1989 providing that fees for recording
of transfer or devolution of title of any land or building under Section 183
shall be as per Schedule. The charging as per the Schedule was on ad
valorem basis at different rates depending on the value of the property
and the cause of transfer. The question in the present cases is whether
F the imposition by the Corporation under the Regulations for the process
of change in the name of the owner in the assessment books of the
Corporation is in the nature of 'fee' or 'tax'.

The Courts below had held that imposition in the garb of 'fee' was
G imposition of 'tax' and the Regulations were arbitrary and violative of
Articles 14 and 246 of the Constitution of India. Hence the present appeal.

Dismissing the appeals, the Court

HELD: 1.1. A charge or fee, if levied for the purpose of raising

H 584
CALCUTTA MUNICIPALCORPN. v. SHREYMERCANTILEPVT. LTD. 585

revenue under the taxing power is a "tax". Similarly imposition of fees A
for the primary purpose of "regulation and control" may be classified as
fees as it is in the exercise of"police power", but if revenue is the primary
purpose and regulation is merely incidental, then the imposition is a "tax".
A tax is an enforced contribution expected pursuant to a legislative
authority for purpose of raising revenue to be used for public or B
governmental purposes and not as payment for a special privilege or
service rendered by a public officer, in which case it is a "fee". Generally
speaking "taxes" are burdens of a pecuniary nature imposed for defraying
the cost of governmental functions, whereas charges are "fees" where they
are imposed upon a person to defray the cost of particular services
rendered to his account. (596-D-El c
1.2. The main difference between "a fee" arid "a tax" is on account
of the source of power. Although "police power" is not mentioned in the
Constitution, it can be relied upon as a concept to bring out the difference
between "a fee" and "a tax". The power to tax must be distinguished from D
an exercise of the police power. The "police power" is different from the
"taxing power" in its essential principles. The power to regulate, control
and prohibit with the main object of giving some special benefit to a
specific class or group of persons is in the exercise of police power and
the charge levied on that class to defray the costs of providing benefit to
such a class is "a fee". (599-B-CI E
1.3. However in the garb of regulation, any fee or levy which has no
connection with the cost or expense of administering the regulation car•.1ot
be imposed and only such levy can be justified which can be treated as a
part of regulatory measure. To that extent, the State's power to regulate
as an expression of the sovereign power has its limitations. It is not plenary
F
as in the case of the power of taxation. (599-E-FJ

Synthetics and Chemicals ltd. v. State of UP., (19901 1 SCC 109,
followed.
G
State of West Bengal v. Kesoram Industries Ltd., (20041 10 SCC 201
and Commissioner of Central Excise v. Ch hata Sugar Co. Ltd., (200413 SCC
466, relied on.

2. In the present case, enumeration of obligatory and discretionary
functions of the corporation in Sections 29 and 30 of Calcutta Municipal H
586 SUPREME COURT REPORTS [2005] 2 S.C.R.

A Corporation Act, 1986 under which civic services are rendered to the rate-
payers for which taxes are leviable as mentioned in Section 170 of the Act.
The entire part-IV of the Act deals not only with the levy of taxes, they
also deal with assessments, valuation, collection and recovery of taxes. T'he
entire machinery for filing of returns, objections and inspection of records
B and properties comes under the part which deals with taxation. The .>
maintenance of assessment books, annual reports, valuation reports etc.
all come under the part which deals with taxation. Section 183 which deals
with notice of transfer also comes under the same part. It is true that under
Section 183(5), fees are payable for mutation as may be prescribed under
the regulations, still, the primary object of such a charge is to augment
C the revenue and the levy of such a charge cannot be treated to be a part
of the regulatory measure. Further, under the Regulations, the corporation
while prescribing fees has levied fe~s on ad valorem basis which is one
more circumstance to show that the impugned levy is in the nature of tax
and not in the nature of a fee. The analysis of the various provisions of
D the Act and the impugned regulations show that the impugned levy is in
exercise of power of taxation under the said Act to augment the revenues
primarily and not as a part of regulatory measure. The purpose of
mutation is to register the transfer in the records of the corporation which
in turn would help the corporation to recover taxes from the existing tax
E payers. Therefore, no special benefit res_ults to the transferee who is made
statutorily liable to inform the corporation of the change, if any, in the
name of the person primarily liable to pay the tax. Mutation enquiry is
instituted in the interest of the corporation for tax purposes and not for
the benefit of the tax payer. (603-D-H; 604-A, Dj

p Nand Kishwar Bux Roy v. Gopal Bux Rai and Ors., AIR (1947) Privy
Council 93, referred to.

3. The levy is irrational, arbitrary, discriminatory and beyond section
183(5) of 1980 Act. The functions of the corporation with regard to
mutation remains the same, whether the applicant is a transferee under a
G conveyance or a lessee or a beneficiary under a will or an heir in the case
of intestate succession. Similarly, the property valuation may be below Rs.
50,000 or above Rs. 2 lacs, the function of the corporation in making the
mutation entry remains the same. Similarly, whatever may be the cause
of mutation, whether it is case of transfer or devolution, the activity of
H mutation remains constant in all the cases. The expenses incu.rred in all
CALCUTTA MUNICIPALCORPN. 1·. SHREYMERCANTILE PVT LTD. [KAPADIA . .I.] 587

the cases also cannot vary whatever be the value of the property or the A
cause of mutation. In the circumstances, there is no reason given for
charging different rates depending on the value of the property and the
cause of transfer. By doing so, the incidence of the levy falls differently
on persons similarly situated resulting in violation of Article 14 of the
Constitution. Moreover, the quantum of fees is disproportionate to the so B
called "services" which is one more circumstance showing arbitrariness
in the levy of such imposition. 1605-A; 604-D-G)

Norendra Kumar and Ors. v. Union of India and Ors., AIR (1960) SC
430 distinguished.

Om Kumar v. Union of India, 1200112 SCC 386, referred to. c
CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 5631 of 2000.

From the Judgment and Order dated 7.7.2000 of the Calcutta High
Court in A.P.O.T. No. 295 of 2000.
D
WITH

C.A. Nos. 41212001 and 6121 of 2000

Tapash Ray, Pradip Kumar Ghosh, Jaideep Gupta, L.C. Agrawala, Avijit
Bhattacharjee, Atanu Saikia, A. Mukherjee, Ms.Shipra Ghose, G.S. Chatterjee, E
Satish Vig, K.V. Vishwanathan, Anil Agarwalla, Jagdeep Anand, Ms.Reshmee
Ray and K.V. Vijayakumar for the appearing parties.

The Judgment of the Court was delivered by

KAPADIA, J. The short question which arises for determination in F
these civil appeals by grant of special leave by Calcutta Municipal Corporation
is whether the imposition for the process of change in the name of the owner
in the assessment books of the corporation is in the nature of"a fee" or "tax".

For the sake of convenience, we refer to the facts of Civil Appeal No.
5631 of 2000. G
Premises bearing No. 9A, Jatindra Mohan Avenue, Calcutta - 700 006
b~longed to Tapas Ghosh, Meenakshi Sinha and Gayatri Chandra. By several
deeds of conveyance, they sold the said premises to Mis Shrey Mercantile (P)
Ltd., Mis Drishti Mercantile (P) Ltd. and Mis KIC Resources Ltd. (hereinafter H
A
588 SUPREME COURT REPORTS [2005] 2 S.C.R.

referred to as "the developers"). The building in the premises was very old
-
and was in a dilapidated condition. The developers decided. to construct. a
new building after demolishing the existing old structure. The developers
submitted the building plan for sanction which the corporation refused to
accept without the names of the developers being brought on record by way
B ofmutati.on. On 21.3.1997, the developers applied for mutation by deletion
of the names of the previous owners and substitution of their names for
which the corporation demanded mutation fees of Rs.3 lacs under Calcutta
Corporation (Taxation) Regulations, 1989. This demand was challenged by
filing of writ petition in the Calcutta High Court.

C The Calcutta Municipal Corporation (Amendment) Act, 1988 was passed
by the State Legislature, which was published in the gazette on 9 .1.1989 and
which came into effect from 20.2.1989. Section 7 of the Amendment Act
(XXI of 1988) provided as under:

"Section 7. Amendment of Section 183 - In sub-section 183 of the
D Principal Act

(\) after the words "Under this Section", the words "and upon
payment of such fees as may be determined ~y regulation" shall
be inserted, and
(2) the words "in such form and in such manner as may be prescribed"
-,,.
E shall be omitted."

In terms of the aforestated Amendment Act, the corporation made
Calcutta Corporation (Taxation) Regulations, 1989, in purported exercise of
the powers conferred by section 602 read with section 183(5). The said
regulations inter alia provided that fees for recording of transfer or devolution
F of title of any land or building under section 183 shall be as perthe schedule
reproduced hereunder:

"SCHEDULE

(I) In the case of transfer/agreement for sale or cost of acquisition or
G in the case where there is certificate or in the case of testamentary succession-

Amount of fee in rupees
(a) If the price/value of the property declared 0.5% of the price/value
does not exceed rupees fifty thousand.
H
CALCUTTA MUNICIPALCORPN 1·. SHREY MERCANTILE PVT.LTD. [KAPADIA, .I.] 589

(b) Where such price/value exceeds rupees I% of the price/value. A
fifty thousand but does not exceed rupees
one lakh.
(c) Where such price/value exceeds rupees one 1.5% of the price/value.
lakh but does not exceed rupees three lakh.
(d) Where such price/value exceeds rupees three 2% of the price/value. B
lakhs but does not exceed rupees five lakhs.
(e) Where such price/value exceed rupees 2% of the price/value.
five lakhs.
(2) In the case of transfer by a deed of lease/sub-lease/assignment
or such other similar instrument, the amount to be paid will be at the C
same rates as at (I) above, on the value shown in the document for
Stamp Duty :

Provided that in calculating the amount of fee to be paid under
(l) or (2) above any fraction of a rupee amounting to fifty paise or
more shall be rounded off to the nearest rupee. D
(3) Jn the case of intestate succession

Amount of fee
(a) If the last decided annual valuation does not Rs.25
exceed rupees three thousand. E
(b) If such valuation exceeds rupees three thousand but Rs.50
does not exceed rupees six thousand.
(c) If such valuation exceeds rupees six thousand but Rs.100
does not exceed rupees ten thousand.
F
(d) If such valuation exceeds rupees ten thousand but Rs.200
does not exceed rupees fifteen thousand.
(e) If such valuation exceeds rupees fifteen thousand Rs.250
4 In case of thika tenant/hut owner in a Bustee hut Rs.20"
premises. G

In the writ petition, the developers pleaded that the said regulations in
the guise of imposing "a fee" had in fact imposed a tax without sanction of
law; that the impost was on ad valorem basis and not in commensuration
with the expenses incurred by the corporation in rendering the alleged services: H
590 SUPREME COURT REPORTS [2005] 2 S.C.R.

A that prior to the amendment of section 183 by Act XXI of 1988, no fee was
imposed for mutation; that after the amendment and framing of the aforestated
regulations, enormous amounts were sought to be levied on ad valorem basis
in the case of mutations consequent upon inter-vivas transfers vis-a-vis
mutations on account of intestate successions where fees were charged at a
B flat rate, particularly when the functions performed by the corporation with
regard to the mutations remained the same. That, whether ·the property was
valued below Rs.50,000 or whether it was valued above Rs.2 lacs, the function
of the corporation with regard to mutation was the same. It was further
averred that whatever may be the cause of mutation, whether it is because of
transfer or change of ownership due to succession or otherwise, the function
C of the corporation in the matter of mutation remained the same and even the
expenses, if any, incurred by the corporation in performing such functions
did not vary, whatever may be the value of the property or the cause of
mutation. It was further averred in the writ petition that under the provisions
of the Act, the owner was primarily responsible to the corporation to pay the
consolidated rate and, therefore, it was necessary for the corporation for the
D purposes of recovery of consolidated rate to maintain records relating to the
ownership of the premises including the name and address of the owner who
was liable to pay the consolidated rate. Further, the corporation was required
to maintain municipal assessment book under section 19 l containing the
particulars of the premises, the names and addresses of the owners and the
E annual value of the premises and, therefore, in order to keep track of the
persons liable to pay the tax, it was necessary to record the change in the
ownership to facilitate the recovery of taxes and, therefore, the corporation
was not providing any special civic service to the citizens. In the circumstances,
there was no justification for levy of so called "fees". Further, the said levy
was on ad valorem basis which circumstance indicated that in the garb of
F fees, the corporation purported to levy and recover taxes which it was not
authorized to do under section 183(5) of the 1980 Act. Moreover, the
aforestated Taxation Regulations were also challenged as arbitrary, irrational,
unjustified and discriminatory on the ground that the corporation had no
authority to charge different rates depending on the cause of transfer and
G value of the property, particularly when the act of mutation was the same, be
it transfer or devolution of right, title and interest by way of testamentary or
intestate succession.

By judgment and order dated 31.1.2000, the learned Single Judge, held,
that mutation was the process of change of name of the owner in the books
H of the corporation; that the impugned regulations had failed to satisfy the
CALCUTT A MUNICIPAL CORPN. 1·. SH REY MERCANTILE PVT.LTD. [KAPADIA. .I] 591

requirement of quid pro quo; and that the corporation was not justified in A
using its power to levy fees on mutation by charging large sums which
partake of the character of taxation. According to the learned Judge, a bare
look at the schedule of the regulations shows that in the garb of imposition
of mutation fees, the corporation has done nothing other than to impose a tax.
Accordingly, the writ application was allowed.
B
Aggrieved by the aforestated judgment of the learned Single Judge, the
matter was carried in appeal by the corporation to the Division Bench.
According to the impugned judgment of the Division Bench, the essential
purpose of section 183 was to mutate somebody's name; that no other service
of any kind whatsoever was rendered to the rate-payers; that under section C
183(5). mutation fee was merely to be prescribed by regulations and not to
impose a tax in the garb of fees; that no such delegation was ever made in
favour of the corporation; that the rate of levy on ad valorem basis itself
indicated that the levy was in the nature of a tax; that the different rates
prescribed for mutation in the case of transfers vis-a-vis intestate succession
indicated that the levy was a tax and not a fee; that the said provision was D
not for the benefit of the owner of the premises but it was for statutory
compliance, failure to comply wherewith was to attract penal consequences;
that no benefit was conferred on the rate-payers and on the contrary, the said
provision was for the benefit of the corporation; that the nature of the services
rendered to the rate-payers for mutation had no connection with the quantum E
of fees sought to be levied; that the fee was neither regulatory nor
compensatory; and that the impugned regulations were discriminatory
inasmuch as the purchasers were subjected to a higher fee than those who got
the ownership of property by way of intestate succession, wholly overlooking
the fact that both these groups for all practical purposes of taxation constituted
one class by themselves. Accordingly, the impugned regulations were held to F
be arbitrary and violative of articles 14 and 246 of the Constitution.

Mr. Tapash Ray, learned senior advocate appearing on behalf of the
appellant submitted that numerous services were rendered by the corporation
under the Act to the citizens, for which it needed funds. It was urged that the
difference between a fee and a tax based on quid pro quo which once existed G
is now almost irrelevant as a test and, therefore, the High Court had erred in
holding that mutation fee was bad on account of absence of quid pro quo. He
submitted that the law as it stands today no longer requires nexus between
the service rendered and the fee charged. He submitted that even otherwise
for the purposes of ascert:iining the quid pro quo, it was incumbent upon the H
592 SUPREME COURT REPORTS (2005] 2 S.C.R.

A High Court to consider various obligatory and discretionary functions of the
corporation as laid down in sections 29 and 30 of the Act a:1d the spending
of mutation fees so collected. He submitted that the fees collected were
applied to meet obi igatory and discretionary functions and. therefore, the
requirement of quid pro quo was satisfied. He submitted that with the collection
of fees and taxes, the corporation was able to meet a fraction of its expenses
B which were needed for the owners and occupiers of a building and, therefore,
the High Court had erred in holding that the imposition was in the nature of
a tax and not a fee, for want of quid pro quo. Learned counsel further
submitted that a tax and a fee are both compulsory exaction of money by
public authorities and a levy in the nature of a fee does not cease to be of
C that character merely because it does not have a direct relation to the actual
service rendered by the authority to each individual who obtains the benefit
of the service. The element _of quid pro quo, according to the learned counsel,
was not always a sine qua non for a fee nor is the element of quid pro quo
necessarily absent in e-very tax. According to the learned counsel, the
purchasers of land and building belong to a separate class from persons who
D inherit property under a testamentary disposition or by way of intestate
succession; that these persons constitute different classes/categories and,
therefore, there was no violation of article 14 of the Constitution in the
matter of levy of mutation fees at different rates from different categories of
persons. In the circumstances, it was submitted that the levy of mutation fees
E by the corporation was in the nature of"a fee" in terms of section 183(5) and,
therefore, the corporation was entitled to prescribe mutation fees which it has
done under the above Regulations and, therefore, there was no violation cf
articles 14 and 246 of the Constitution.

Shri Pradip Kumar Ghosh, learned senior counsel appearing on behalf
F of the original petitioners submitted that although mathematical precision is
not accepted in the matter of correlation between the service rendered and the
imposition, the law as it stands today certainly requires an imposition in the
nature of fees to be based on rendition of service; that no charge can be
levied as a fee without any correlation between the amount of levy and the
cost of any service; that in the present case, the corporation in the matter of
G taxation was duty bound to maintain assessment record containing names of
the occupiers, names of the owners, description of the property, annual value
etc. and as a matter of taxation, the corporation had to maintain up to date
record in order to facilitate expeditious recovery of taxes from the existing
owners/occupiers. According to the learned counsel, mutation was the process
H for change in the name of the owner in the assessment books of the corporation
CALCUTTA MUNICIPAL CORPN. v SHREY MERCANTILE PVT.LTD. [KAPADIA, J.) 593

and, therefore, no service of special kind was rendered to the rate-payers in A
the making of mutation entry in the assessment books of the corporation; that
the corporation was not rendering any extra service to rate-payers in the
matter of mutation which was a part of taxing process under the Act; that
there was total absence of quid pro quo; that the levy was discriminatory as
the incidence thereof was unequal on the persons falling within the same
class; that there was no rational reason for imposing higher rate on purchasers B
vis-a-vis persons who became owners by way of intestate succession; that the
levy based on ad valorem basis itself indicated that the corporation was
trying to recover taxes in the garb of fees which it was not authorized to do
and, therefore, the levy was ultra vires articles 14 and 246 of the Constitution.
In the circumstances, it was submitted that no interference was called for in C
the impugned judgment of the High Court.

The Calcutta Municipal Corporation Act was enacted on 28.12.1981 to
amend and consolidate the law relating to municipal affairs of Calcutta. Chapter
IV deals with power and functions of the municipal authorities and the officers
of the corporation. Section 29 deals with obligatory functions of the corporation D
and it lays down that the corporation shall having regard to the available
resources provide civic services including water supply, sewerage and drainage
to the rate-payers. One of the functions mentioned in section 29(z) is to
compile and maintain records relating to the administration and functions of
the corporation under the Act. Section 30 deals with discretionary functions E
of the corporation. Section 32 deals with authentication of the orders of the
corporation. Part-III deals with Finance. Chapter VIII which falls in part-III
refers to the setting up of the municipal fund in five accounts, namely, water-
supply account, road development and maintenance account, general account
etc. Chapter XII deals with taxation. Under section 170, the corporation is
empowered to levy a consolidated rate on lands and buildings. Under section F
170(2), the levy, assessment and collection of taxes mentioned in section
170(1) is required to be done in accordance with the provisions of the Act
and the rules made thereunder. Section 174 deals with determination of annual
valuation. Section 178 deals with municipal assessment code. Section 179
deals with periodical assessment of lands and buildings situated in any ward G
of the corporation. Section 180 deals with revision of assessment. Section
181 deals with submission of returns fo~ purposes of assessment. Under the
said section, the municipal commissioner is authorized to call upon any person
primarily liable for payment of consolidated rate of land or building to give
such particulars as may be required to determine the annual value of such
land or building. Section 182 deals with the submissions ofreturns for purposes H
594 SUPREME COURT REPORTS [2005] 2 S.C.R.

A of revision in the annual value of land and building. Section I 83 is the
section which deals with notice of transfers. Under section 183( I), whenever
the title of any person to any land or building is transferred, such person, if
primarily liable for the payment of consolidated rate on such land or building,
and the transferee to whom the title is transferred shall within the stipulated
period give notice of such transfer to the municipal commissioner. Under
B section 183(2) in the event of the death of any person primarily liable, the
transferee, on whom the title devolves, is required within the stipulated period
to give notice of such devolution to the municipal commissioner. Under
section 183(4), if the transferor fails to give notice, he is made liable to
penalty. Further, he is also made liable for payment of consolidated rate on
C such land or building till he gives such notice to the municipal commissioner.
Under section 183(5), it is further provided that the municipal commissioner
shall on receipt of such notice of transfer or devolution of title record such
transfer or devolution in the assessment book subject to payment of such fees
as may be determined by the regulaticms. Section 185 deals with amendment
of assessments. Section 186 deals with objections against valuation of
D assessment. Section 192 deals with amendment of municipal assessment book
by insertion therein of the name of any person whose name ought to have
been inserted or by striking out the name of any person not liable for payment
of consolidated rate. Under section 602 of the Act, the corporation is
empowered to make regulations not inconsistent with the provisions of the
E Act for discharging functions under the Act.
In exercise of the power conferred under section 602 read with section
I 83(5), the corporation with the approval of the State Government framed
the following regulations called Calcutta Municipal Corporation (Taxation)
Regulations, I 989, which are reproduced hereinbelow:
F
"REGULATIO NS

I. (a) These regulations may be ~ailed "The Calcutta Municipal
Corporation (Taxation) Regulations, 1989".
(b) They shall come into force on the date of their publication
G in the Official Gazette.
2. In these regulations, unless the context otherwise requires
the "Act" means the Calcutta Municipal Corporation Act, 1980
(West Ben, Act LIX of 1980) and the other terms and expressions
used herein and not defined shall have the same meaning as in
H the Act.
CALCUTTA MUNICIPALCORPN. '" SHREY MERCANTILE PVT. LTD. fKAPADIA,J] 595
3. Fees for recording of transfer or devolution of title of any A
land or building under sub-section (5) of section 183 of the Act
shall be as per Schedule below:-

SCHEDULE

(1) In the case of transfer/agreement for sale or cost of acquisition
or in the case where there is certificate or in the case of testamentary
B
succession

Amount offee in rupees
(a) If the price/value of the property declared 0.5% of the price/value
does not exceed rupees fifty thousand. c
(b) Where such price/value exceeds rupees fifty 1% of the price/value.
thousand but does not exceed rupees one
lakh.

(c) Where such price/value exceeds rupees one 1.5% of the price value.
D
lakh but does not exceed rupees three lakh.

(d) Where such price/value exceeds rupees three 2% of the price/value.
lakhs but does not exceed rupees five lakhs .
.......
E
(e) Where such price/value exceed rupees five 2.5% of the price/value.
lakhs.

........._ (2) In the case of transfer by a deed of lease/sub-lease/assignment
or such other similar instrument, the amount to be paid will be at the
same rates as at (I) above, on the value shown in the document for F
Stamp Duty :

Provided that in calculating the amount of fee to be paid under
(1) or (2) above any fraction of a rupee amounting to fifty paise or
more shall be rounded off to the nearest rupee.
G
(3) In the case of intestate succession-

Amount of fee
(a) If the last decided annual valuation does not Rs.25
exceed rupees three thousand.
H
596 SUPREME COURT REPORTS [2005] 2 S.C.R.

A (b) If such valuation exceeds rupees three thousand Rs.SO
but does not exceed rupees six thousand.
(c) If such valuation exceeds rupees six thousand Rs.100
but does not exceed rupees ten thousand.
(d) If such valuation exceeds rupees ten thousand Rs.200
B but does not exceed rupees fifteen thousand.
(e) If such valuation exceeds rupees fifteen thousand Rs.250
.......
4 In case of thika tenant/hut owner in a Bustee hut Rs.20"
premises.

C The central point in the entire controversy is whether the impugned
imposition is in the nature of a "fee" or a "tax".

According to "Words & Phrases", Permanent Edition, Vol. 41 Page
230, a charge or fee, if levied for the purpose of raising revenue under the
taxing power is a "tax". Similarly, imposition of fees for the primary purpose
D of "regulation and control" may be classified as fees as it is in the exercise
of "police power", but if revenue is the primary purpose and regulation is
merely incidental, then the imposition is a "tax". A tax is an enforced
..
contribution expected pursuant to a legislative authority for purpose of raising
revenue to be used for public or governmental purposes and not as payment

E
for a special privilege or service rendered by a public officer, in which case
it is a "fee". Generally speaking "taxes" are burdens of a pecuniary nature ' --
imposed for defraying the cost of governmental functions, whereas charges
are "fees" where they are imposed upon a person to defray the cost of particular
services rendered to his account.

In the case of State of West Bengal v. Kesoram Industries ltd., reported
F in [2004] 10 SCC 201, the Constitution Bench of this Court while
differentiating between the "power to regulate" and "power to tax" observed:

"108. It is of paramount significance to note the difference between
"power to regulate and develop" and "power to tax".

G 109. The primary purpose of taxation is to collect revenue. Power to
tax may be exercised for the purpose of regulating an industry,
commerce or any other activity; the purpose of levying such tax, an
impost to be more correct, is the exercise of sovereign power for the
purpose of effectuating regulation though incidentally the levy may
-·
contribute to the revenue. Cooley in his work on taxation (Vol. 1, 4th
H
CALCUTIA MUNICIPAL CORPN. 1·. SHREY MERCANTILE PVT LTD. !KAPADIA, .I] 597

Edn., 1924) deals with the subject in paras 26 and 27: A
"There are some cases in which levies are made and collected
under the general designation of taxes, or under some term
employed in revenue laws to indicate a particular class of taxes,
where the imposition of the burden may fairly be referred to
some other authority than to that branch of the sovereign power B
of the State under which the public revenues are apportioned and
collected. The reason is that the imposition has not for its object
the raising of revenue but looks rather to the regulation of relative
rights, privileges and duties as between individuals, to the
conservation of order in the political society, to the encouragement C
of industry, and the discouragement of pernicious employments.
Legislation for these purposes it would seem proper to look upon
as being made in the exercise of that authority which is inherent
in every sovereignty, to make all such rules and regulations as are
needful to secure and preserve the public order, and to protect
each individual in the enjoyment of his own rights and privileges D
by requiring the observance of rules of order, fairness and good
neighbourhood, by all around him. This manifestation of the
sovereign authority is usually spoken of as the police power. The
power to tax must be distinguished from an exercise of the police
power." [State v. Tucker, 56 SC 516 : 35 SE 215].
E
The police power "is a very different one from the taxing power, in
its essential principles, though the taxing power, when properly

- exercised, may indirectly tend to reach the end sought by the other
in some cases". (p.94) "The distinction between a demand of money
under the police power and one made under the power to tax is not
so much one of form as of substance." (p. 95). The distinction between F
a levy in exercise of police power to regulate and the one which
would be in the nature of tax is illustrated by Cooley by reference to
a licence. He says:

"So-called license taxes are of two kinds. The one is a tax for the
purpose of revenue. The other, which is, strictly speaking, not a G
tax at all but merely an exercise of the police power, is a fee
imposed for the purpose of regulation." (p.97)

***
"Suppose a charge is imposed partly for revenue and partly for H
598 SUPREME COURT REPORTS [2005] 2 S.C.R.

A regulation. Is it a tax or an exercise of the police power? Other
considerations than those which regard the production of revenue are
admissible in levying taxes, and regulation may be kept in view when
revenue is the main and primary purpose. The right of any sovereignty
to look beyond the immediate purpose to the general effect neither is
nor can be disputed. The Government has general authority to raise
B a revenue and to choose the methods of doing so; it has also general
authority over the regulation of relative rights, privileges and duties,
and there is no rule of reason or policy in the Government which can
require the legislature, when making laws with the one object in
view, to exclude carefully from its attention the other. Nevertheless,
c cases of this nature are to be regarded as cases of taxation. If revenue
is the primary purpose, the imposition is a tax. Only those cases
where regulation is the primary purpose can be specially referred to
the police power. If the primary purpose of the legislative body in
imposing the charge is to regulate, the charge is not a tax even if it
produces revenue for the public". (Cooley, ibid., pp.98-99)
D
110. This Court in a seven-Judge Bench decision in Synthetics and
Chemicals Ltd. v. State of U.P., (1990] 1 SCC 109 agreed that
regulation is a necessary concomitant of the police power of the
State. However, it was an American doctrine and in the opinion of
the Court it was not perhaps applicable as such in India. The Court
E endorsed recognizing the power to regulate as a part of the sovereign
power of the State exercisable by the competent legislature. Brushing
aside the need for discussion on the question, whether under the
Constitution the States have police power or not, the Court accepted
the position that the State has the power to regulate. However in the
F garb of exercising the power to regulate, any fee or levy which has
no connection with the cost or expenses o(administering the regulation,
cannot be imposed; only such levy can be justified as can be treated
as part of regulatory measure .. Thus, the State's power to regulate
perhaps not as emanation of police power but as an expression of the
sovereign power of the State has its limitations. In our opinion, these
G observations of the Court lend support to the view which we have
formed that a power to regulate, develop or control would not include
within its ken a power to levy tax or fee except when it is only
regulatory. Power to tax or levy for augmenting revenue shall continue
to be exercisable by the legislature in whom it vests i.e. the State
Legislature in spite of regulation or control having been assumed by
H
CALCUTTA MUNICIPAL CORPN. ''· SHREY MERCANTILE PVT LTD. [KAPADIA, J) 599

another legislature i.e. the Union. State legislation levying a tax in A
such manner or of such magnitude as can be demonstrated to be
tampering or intermeddling with the Centre's regulation and control
of an industry can perhaps be the exception to the rule just stated."

Therefore, the main difference between "a fee" and "a tax" is on account
of the source of power. Although "police power" is not mentioned in the B
Constitution, we may rely upon it as a concept to bring out the difference
between "a fee" and "a tax". The power to tax must be distinguished from an
exercise of the police power. The "police power" is different from the "taxing
power" in its essential principles. The power to regulate, control and prohibit
with the main object of giving some special benefit to a specific class or
group of persons is in the exercise of police power and the charge levied on C
that class to defray the costs of providing benefit to such a class is "a fee".
Therefore, in the aforestated judgment in Kesoram 's case, it has been held
that where regulation is the primary purpose, its power is referable to the
"police power". If the primary purpose in imposing the charge is to regulate,
the charge is not a tax even if it produces revenue for the government. But D
where the government intends to raise revenue as the primary object, the
imposition is a tax. In the case of Synthetics & Chemicals Ltd v. State of
UP., reported in [1990] l SCC 109, it has been held that regulation is a
necessary concomitant of the police power of the State and that though the
doctrine of police power is an American doctrine, the power to regulate is a
part of the sovereign power of the State, exercisable by the competent E
legislature. However, as held in Kesoram 's case (supra), in the garb of
regulation, any fee or levy which has no connection with the cost or expense
of administering the regulation cannot be imposed and only such levy can be
justified which can be treated as a part of regulatory measure. To that extent,
the State's power to regulate as an expression of the sovereign power has its p
limitations. It is not plenary as in the case of the power of taxation.

These well settled principles have been reiterated by this Court in the
case of Commissioner of Central Excise v. Chhata Sugar Co. Ltd. reported in
[2004] 3 sec 466 in which it has been held:-

" 18. The Constitution of India postulates either a tax or a fee. G
However, the use of the expression "tax" or "fee" in a statute is not
decisive; as on a proper construction thereof and having regard to its
scope and purport "fee" may also be held to be a tax.

19. The definition of "tax" in terms of clause (28) of Article 366
of the Constitution is wide in nature. The said definition may be for H
600 SUPREME COURT REPORTS (2005] 2 S.C.R.

A the purpose of the Constitution; but it must be borne in mind that the
legislative competence conferred upon the State Legislature or
Parliament· to impose "tax" or "f~e" having been enumerated in
different entries in the three lists contained in the Seventh Sch~dule
of the Constitution of India, the same meaning of the expression
"tax" unless the context otherwise requires should be assigned.
B
20. Having regard to the fact that different legislative entries have
been made providing for imposition of "tax" and "fee" separately,
indisputably, the .said expression do not carry the same meaning.
Thus a distinction between a tax and fee exists and the same while
interpreting a statute has to. be borne in mind.
c
21. A distinction must furthermore be borne in mind as regards
the sovereign power of the State as understood in India and the doctrine
of police power as prevailing in the United States of America. In
some jurisdictions a distinction may exist between a police power
and a power to tax but as in the Constitution of India, the word "tax"
D is defined, it has to b.e interpreted accordingly.

22. The expression "regulatory fee" is not defined. Fee, therefore,
may be held to be a tax if no service is rendered. While imposing a
regulatory fee, although the element of quid pro quo, as understood
in common parlance, may not exist but it is trite that regulatory fee
E may be in effect and substance a tax. [See: Corph. of Calcutta v.
Liberty Cinema, AIR (1965) SC 1107].

23. In Municipal Corpn. Amritsar v. Senior Supdt. of Post Offices,
[2004] 3 SCC 92 it was held: (SCC p. 9-97, para 8)

F "8. The question, whether the demand so made was by way of
'service charge or 'tax', need not detain us any longer. The demand
so made was with regard to the services rendered to. the
respondents' Department, like water supply, street-lighting
drainage and approach roads to the land and buildings. In the
counter, the respondents averred that they are paying for the
G services rendered by the appellant separately. It is also categorically
averred that no other specific services are being provided to the
respondents for which the tax in the shape of service charges can
be levied and realized from the respondents. There is no provision
in the Municipal Corporation Act for levying services charges.
H The only provision is by way of tax. Undisputedly, the appellant
CALCUTTA MUNICIPALCORPN. '" SHREY MERCANTILE PVL LTD. l,KAPADIA,J) 60 l

Corporation is collecting the tax from general public for water A
supply, street-lighting and approach roads, etc. Thus, the 'tax'
was sought to be imposed in the garb of 'service charges'."

24. We may furthermore notice that a seven-Judge Bench of this
Court in Synthetics and Chemicals ltd v. State of UP., (1990] I
sec I 09 while considering the question as to whether the levy on B
industrial alcohol by the State is justifiable, inter alia, held that when
revenue earned out of the impost is substantial, the same would liot
be justifiable as fee.

25. In Liberty Cinema this Court, while interpreting Section 548
of the Calcutta Municipal Act providing for grant of a licence, C
observed: (AIR p. 1116, para 18)

"The reference to the heading of Part V can at most indicate
that the provisions in it were for conferring benefit on the public
at large. The cinema house owners paying the levy would not as
such owners be getting that benefit. We are not concerned with D
the benefit, if any, received by them as members of the pub lie for
that is not special benefit meant for them. We are clear in our
mind that if looking at the terms of the provision authorizing the
levy, it appears that it is not for special services rendered to the
person on whom the levy is imposed, it cannot be a fee wherever
it may be placed in the statue. A consideration of where Sections E
443 and 548 are placed in the Act is irrelevant for determining
whether the levy imposed by them is a fee or a tax."

It was further observed: (AIR p.1116, paras 19-20)

"19. The last argument in this connection which we have to F
notice was based on Sections 126 and 127 of the Act. Section 126
deals with the preparation by the Chief Executive Officer of the
Corporation called Commissioner, of the annual budget. The
budget has to include an estimate of receipts from all sources.
These receipts would obviously include taxes, fees, licence fees G
and rents. Under Section 127(3) the Corporation has to pass this
budget and to determine subject to Part IV of the Act, the levy
of consolidated rates and taxes at such rates as are necessary to
provide for the purposes mentioned in sub-section (4). Sub-section
(4) requires the Corporation to make adequate and suitable
provision for such services as may be required for the fulfilment H
602 SUPREME COURT REPORTS [2005] 2 S.C.R.

A of the several duties imposed by the act and for ce1tain other
things to which it is not necessary to refer. The first point made
was that these sections showed that the act made a distinction
between fees and taxes. It does not seem to us that anything turns
on this as the only question now is whether the levy under Section
548 is a fee. The other point was that clauses (3) and (4) of
B Section 127 showed that the Corporation could fix the consolidated
rates and taxes and that the determination of rates for these had to
be in accordance with the needs for carrying out the Corporation's
duties under the Act. It was said that as the licence fee leviable
under Section 548 did not relate to any duty of the Corporation
c under the Act, it being optional for the Corporation to impose
tenns for grant of licences for cinema houses, the rate for that fee
was not to be fixed in reference to anything except rendering of
services. We are unable to accept this argument and it is enough
to say in regard to that it is not right that Section 443 does not
impose a duty on the Corporation. We think it does so, though in
D what manner and when it will be exercised it is for the Corporation
to decide. It is impossible to call it a power, as the respondent
wants to do, for it is not given to the Corporation for its own
benefit. The Corporation has been set up only to perfonn municipal
duties and its powers are for enabling it to perfonn those duties.
E Furthermore there is no doubt that an estimate of the licence fee
has to be included in the budget and therefore the word 'tax' in
Section 127(3) must be deemed to include the levy under Section
548. The words 'subject to the provisions of Part IV' in Section
127 (3) must be read with the addition of the words 'where
applicable'.
F
20. The conclusion to which we then arrive is thatthe levy
under Section 548 is not a fee as the Act does not provide for any
services of special kind being rendered resulting-in benefits to the
person on whom it is imposed. The work of inspection done by
the Corporation which is only to see that the terms of the licence
G· are observed by the licensee is not a service to him. No question
here arises of correlating the amount of the levy to the costs of
any service. The levy is a tax. It is not disputed, it may be stated,
that if the levy is not a fee, it must be a tax."

26. A regulatory statute may also contain taxing provisions.
H
CALCUTTA MUNICIPAL CORPN. v. SHREY MERCANTILE PVT LTD. [KAPADIA, J.] 603

27. The decisions of this Court point out towards the need of existence A
of the element of quid pro quo for imposition of fee; be it to the
person concerned or be it to a group to which he belongs; irrespective
of the fact as to whether the benefit of such service is received directly
or indirectly.

28. The point at issue is required to be considered keeping in view B
the aforementioned legal position.

29. By reason of the provisions of the U.P. Sheera Niyantran
Adhiniyam, 1964, the trade carried out by the respondents is sought
to be regulated.

30. Some service, therefore, was required to be rendered by the State
c
or the statutory authority to the owners of the factory producing
molasses or the molasses industries generally if an impost by way of
"fee" was to be levied."

Applying the above principles to the present case, we find enumeration D
of obligatory and discretionary functions of the corporation in sections 29
and 30 under which civic services are rendered to the rate-payers for which
taxes are leviable as mentioned in section 170 of the Act. As stated above,
the entire part-IV of the Act deals not only with the levy of taxes, they also
deal with assessments, valuation, collection and recovery of taxes. The entire
machinery for filing of returns, objections and inspection of records and E
properties comes under the part which deals with taxation. The maintenance
of assessment books, annual reports, valuation reports etc. all come u. ·der the
part which deals with taxation. Section 183 which deals with notice of transfer
also comes under the same part. It is true that under section 183(5), fees are
·payable for mutation as may be prescribed under the regulations, still as p
stated above, the primary object of such a charge is to augment the revenue
and the levy of such a charge cannot be treated to be a part of the regulatory
measure. Further, under the Regulations, the corporation while prescribing
fees has levied fees on ad valorem basis which is one more circumstance to
show that the impugned. levy is in the nature of tax and not in the nature of
a fee. Further, the quantum of levy indicates that it is a tax and not a fee. The G
analysis of the various provisions of the Act and the impugned regulations
show that the impugned levy is in exercise of power of taxation under the
said Act to augment the revenues primarily and not as a part of regulatory
measure. As stated above, the purpose of mutation is to register the transfer
in the records of the corporation which in tum would help the corporation to H
604 SUPREME COURT REPORTS [2005] 2 S.C.R.

A recover taxes from the existing tax payers. Therefore, no special benefit
results to the transferee who is made statutorily liable to inform the corporation
of the change, if any, in the name of the person primarily liable to pay the
tax.

In the case of Nand Kishwar Bu" Roy v. Copa/ Bux Rai and Ors.,
B reported in [AIR (1940) Privy Council 93], the Court, while discussing the
nature of mutation proceedings, observed:

"Mutation proceedings are merely in the nature of fiscal inqutnes,
instituted in the interest of the State for the purpose of ascertaining
which of the several claimants for the occupation of the property may
c be put into occupation of it with the greater confidence that the revenue
for it will be paid."

Therefore, it is clear that mutation enquiry is instituted in the interest
of the corporation for tax purposes and not for the benefit of the tax payer.

D Now coming to the question of challenge to the levy as arbitrary and
discriminatory and violative of Article 14, we find that the functions of the
corporation with regard to mutation remains the same, whether the applicant
is a transferee under a conveyance or a lessee or a beneficiary under a will
or an heir in the case of intestate succession. Once an application for mutation
E is made, the same is examined by the department and after hearing the
objections, if any, the record is ordered to be changed. Ultimately, the exercise
is for fiscal purpose. Similarly, the property valuation may be below Rs.50,000
or above Rs.2 lacs, the function of the corporation in making the mutation
entry remains the same. Similarly, whatever may be the cause of mutation,
whether it is case of transfer or devolution, .the activity of mutation remains
F constant in all the cases. The expenses incurred in all the cases also cannot
vary, whatever be the value of the property or the cause of mutation. In the
circumstances, there is no reason given for charging different rates depending
on the value of the property and the cause of transfer. By doing so, the
incidence of the levy falls differently on persons similarly situated resulting
G in violation of article 14 of the Constitution. Moreover, the quantum of fees
is disproportionate to the so called "services" which is one more circumstance
showing arbitrariness in the levy of such imposition. So far as article 14 is
concerned, the Cowts in India have always examined whether the classification
was based on intelligible differentia and whether the differentia had a
reasonable nexus with the object of legislation [See: Om Kumar v. Union of
H India, reported in [2001] 2 sec 386].
CALCUTrA MUNICIPAL CORPN. 1·. SHREY MERCANTILE PVT LTD. [KAPADIA,.I.) 605

Applying the said tests to the impugned levy, we find that the levy is A
irrational, arbitrary, discriminatory and beyond section 183(5) of the said
1980 Act.

Before concluding, we may point out that the entire argument advanced
on behalf of the respondents herein was that the imposition was in the nature
ofa tax and not a fee and that the said imposition was arbitrary, discriminatory, B
irrational and ultra vires article 14 of the Constitution. There was no challenge
to the power of the State to levy mutation fees under section 183(5) of the
said 1980 Act (as amended). In the case of Narendra Kumar and Ors. v.
Union of India and Ors., reported in AIR (l 960) SC 430, one of th~ arguments

- advanced on behalf of Union of India was that since the petitioner Narendra
Kumar had conceded the competency of the Central Government to make a
C
Control Order under section 3 of the Essential Commodities Act, i 955, it was
not open to him to submit that the said section 3 was ultra vires articles
l 9( I )(t) and l 9(1 )(g). In the said case, the controversy was - whether the
Non-ferrous Metal Control Order issued by the Central Government under
section 3 of the Essential Commodities Act fell within the saving provisions D
of articles l 9(5) and 19(6) of the Constitution. Therefore, the Court was
required to examine whether the Control Order violated the fundamental
rights of the citizen and, if so, whether the law was saved by aiticles l 9(5)
and l 9(6). In the light of the said controversy, this Court while rejecting the
contention of Union of India examined the question of validity of section 3 E
of Essential Commodities Act, though it was not specifically challenged.
Therefore, the ratio of the decision in Narendra Kumar's case (supra) has no
application to the facts of the present case.

For the aforestated reasons, we find no infirmity in the impugned
judgment and accordingly, the civil appeals herein stand dismissed, with no F
order as to costs. However, our order of dismissal of IA No. I of 2004 in
Civil Appeal No. 6121 of 2000 passed on 23.2.2005 will not preclude the
Jntervener(s) from claiming refund in accordance with law.

K.K.T. Appeal dismissed.