Holding

The notification fixing registration fees under Section 78 of the Registration Act is valid; the levy is a fee, not a tax, and may be credited to the Consolidated Fund.

Summary

The plaintiffs, Mis. Shivalik Agro Poly Products Ltd. and others, were allotted an industrial plot and, to secure loans, executed a mortgage deed that required payment of stamp duty and registration fees as per a Himachal Pradesh Government notification under Sections 78 and 79 of the Registration Act. They sued to declare the notification void and recover the registration fee, arguing it was a tax, not a fee, and that the fee proceeds were not kept in a separate fund. Lower courts held the notification invalid, deeming the fee a tax. On appeal, the Supreme Court examined the distinction between tax and fee, holding that a fee need not have a precise quid pro quo and may be credited to the Consolidated Fund under Article 266. The Court found the notification valid, the levy a fee, and allowed the appeal, setting aside the lower courts' judgments and dismissing the suit.

Issues considered

The validity of the Himachal Pradesh Government notification fixing registration fees under Section 78 of the Registration Act.
Whether the registration fee constitutes a tax or a fee.
Whether a fee must be kept in a separate fund or may be credited to the Consolidated Fund of the State.
The scope of the State's statutory power to levy registration fees.

Legislation cited

Constitution of Indias. Article 266
Registration Act, 1908s. 78, s. 79
Transfer of Property Act, 1882s. 107, s. 123, s. 17, s. 54

Subjects

registration feefee vs taxRegistration ActSection 78Consolidated FundSupreme Courtindustrial plotmortgage deedsovereign functionfee levy

Judgment

STATE OF HIMACHAL PRADESH AND ORS. A
v.
MIS. SHIVALIK AGRO POLY PRODUCTS AND ORS.

SEPTEMBER 14, 2004

[R.C. LAHOTI, CJ., G.P. MATHUR AND C.K. THAKKER, JJ.] B

Registration Act-Sections 78 & 79-Notifications issued by State
Government-Fixing registration fee for registration of documents-On a
graduated form on the basis of value of subject matter of the instrument-
Held, legal and valid. c
Tax and fee-Collection of Registration fee-Held, a fee and not tax-
The relationship between the levy and services rendered cannot be of
mathematical exactitude-Further Held, the vagaries in its distribution
amongst the class do not detract from the concept of a fee.
D
The Respondents were allotted an industrial plot by the Himachal
Pradesh Housin~ Board for establishing an industrial unit. Respondents
were sanctioned two loans by Himachal Pradesh Financial Corporation
and Himachal Pradesh Mineral and Industrial Development Corporation ·
respectively and in order to secure the loan, they were required to
mortgage and hypothecate the fixed assets of their leasehold rights in
E
the industrial plot and the machinery installed therein with the aforesaid
Corporation for which a deed of simple mortgage was required to be
executed. At the time of the execution of the mortgage deed, they were
required to pay stamp duty and registration charges in accordance with
· the notification issued under sections 78 and 79 of the Registration Act F
by the State of Himachal Pradesh. The Respondents filed a suit seeking
a declaration that the notification issued by the State of Himachal Pradesh
under Section 78 of Registration Act be declared void and ultra vires
and for recovery of registration fee for registering the mortgage deed.

Civil Court decreed the suit and declared the notification issued by
G
the State Government prescribing the registration fee to be null and
void and also passed a decree for refund in favour of the plaintiffs,
which was affirmed in appeal by the District Judge and also in Second
Appeal by the High Court. The main ground on which the suit has been
decreed is that the State had not led any evidence to show that the H
393
394 SUPREME COURT REPORTS (2004) SUPP. 4 S.C.R.

A amount realised by way of registration fee is deposited under a separate
head and that it is exclusively utilised for the maintenance of the
registration department. In absence of any evidence, the conclusion was
inevitable that the amount realised was put in the Consolidated Fund of
the State Government and was being utilised by the Government for
B general purposes.

In appeal to this Court, the appellants contended that the notification
had been issued by the State Government in exercise of the statutory
power conferred by Sections 78 and 79 of Registration Act and, therefore,
it was a sovereign function of the State for which no suit was
C maintainable; that the notification was perfectly legal and valid; that
the registration fee had been charged in accordance with the schedule
of fee fixed by the State Government in the notification for the
registration of documents and that the registration fee charged was
perfectly justified.

D Allowing the Appeal, the Court

HELD : 1. The consistent view now is that there is no generic
difference between a tax and a fee which are both compulsory exaction
of money by public authorities. The co-relationship between the levy
and the services rendered should be one of general character and not of
E
mathematical exactitude. Further, the broad and general co-relationship
between the totality of the fee on the one hand and the totality of the
expenses of the services on the other, will be sufficient to justify the levy.
The levy will not fail only on the ground that the measure of its
distribution on the persons or incidence is disproportionate to the actual
F services rendered by them, the true test being the comprehensive level
of the value of the totality of the services set off against the totality of
the receipts. The character of the fee is -thus established. The vagaries
in its distribution amongst the class do not detract from the concept of
a fee as such. (405-H; 406-A, B, CJ
G Commr, HRCE, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri
Shirur Mutt, AIR (1954) SC 282, relied on.

..
Sreenivasa General Traders v. State of A.P., AIR (1983) SC 1246;
MCD and Ors. v. Mohd. Yasin, AIR (1983) SC 617; Krishi Upaj Mandi
H Samiti and Ors. v. Orient Paper & Industries Ltd., (1995] 1 SCC 655; Secy.
STA TE v. SHIV ALIK AGRO POLY PRODUCTS 395

to Government of Madras & Anr. v. P.R. Sriramulu and Anr., [1996) 1 sec A
345; Om Prakash Agarwal v. Giri Raj Kishore, [1986] 1 SCC 722 and
Bombay Stock Exchange Broker's Forum °'!· SEBI, (2001] 3 SCC 482,
referred to.

2. There is no material on record to show that the overall amount B
received by the Government by way of fee from the Registration
department far exceeds the overall expenditure incurred in maintaining
the said department. The High Court and also the District Court merely
took into consideration the registration fee paid by the plaintiffs and did
not at all examine whether there was any substantial discrepancy between
the total amount of fee realised by the registration department and the C
total amount of expenditure incurred by the Government in the
maintenance and functioning of the department. The notification issued
by the State Gowrnment could not be struck down merely by taking
into consideration the registration fee paid by the plaintiffs and
quantification of the value of services rendered to them. [407-D, E) D

3. The view taken in Shirur Mutt case (supra) had undergone a
considerable change by subsequent decisions of this Court. Moreover,
having regard to the express language used in Article 266 of the
Constitution, it is not possible for the State Government to keep the fee
realised in a separate fund other than the Consolidated Fund of the E
State. [408-A)

Delhi Cloth and General Mills Co. Ltd. and Ors. v. The Chief
Commissioner, Delhi & Anr., AIR (1964) Punj. 492; State of U.P. v. The
Dist. Registrar, Meerut and Anr., AIR (1971) All. 390 and The Chief F
Commissioner of Delhi and Anr. v. The Delhi Cloth and General Mills Co.
Ltd., AIR (1978) SC 1181, overruled.

CIVIL APPELLATE ruRISDICTION: Civil Appeal No. 2122of1999.

From the Judgment and Order dated 10.12.97 of the Himachal Pradesh G
High Court in R.S.A. No. 386 of 1991.

J.S. Attri for the Appellants.

Syed Shahid Hussain Rizvi and lrshad Hanif for the Respondents. H
396 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A The Judgment of the Court was delivered by

G.P. MATHUR, J. : 1. This appeal, by special leave, has been
preferred by the defendants (State of Himachal Pradesh and three others)
against the judgment and decree dated 10.12.1997 of the High Court
ofHimachal Pradesh by which the Second Appeal filed by the appellants was
B
dismissed and the judgment and decree passed by the District Judge and also
Senior Sub-Judge, Solan decreeing the plaintiffs suit were affirmed.

2. Mis. Shivalik Agro Poly Products Ltd. and others filed the suit
seeking a declaration that the notification dated 14.4.1969 issued by the State
c of Himachal Pradesh under section 78 of the Registration Act be declared
void and ultra vires and for recovery of Rs. 27,771 paid by them as
registration fee for registering the mortgage deed dated 30.10.1978. The case
of the plaintiffs, in brief, was that they were allotted an industrial plot in
Parwanoo by the Himachal Pradesh Housing Board for establishing an
industrial unit. They were sanctioned two loans of Rs. 30 lacs and Rs. 27.76
D lacs by Himachal Pradesh Financial Corporation and Himachal Pradesh
Mineral and Industrial Development Corporation respectively and in order
to secure the loan, they were required to mortgage and hypothecate the fixed
assets of their leasehold rights in the industrial plot and the machinery
installed therein with the aforesaid Corporations for which a deed of simple
E mortgage was required to be executed. At the time of the execution of the
mortgage deed, the plaintiffs were required to pay stamp duty of Rs.45,804
and registration charges amounting to Rs.27,760 in accordance with the
notification issued under sections 78 and 79 of the Registration Act by the
State of Himachal P;·adesh. The plaintiffs challenged the vires of the
F notification fixing the registration fee by filing Civil Writ Petition No. l 05
of 1979 which was summarily dismissed by a Division Bench of the High
Court on 22.5.1979 on the ground that the plaintiffs had an equally
efficacious alternative remedy of filing a civil suit wherein the validity of
the notification could be challenged. After dismissal of the writ petition, the
suit was instituted claiming the reliefs mentioned above. The defendant-
G appellants contested the suit on the grounds, inter alia, that the impugned
notification had, been issued by the State Government in exercise of the
statutory power conferred by Sections 78 and 79 of the Registration Act and,
therefore, it was a sovereign function of the State for which no suit was
maintainable; that the notification was perfectly legal and valid; that the
H .registration fee had been charged in accordance with the schedule of fee fixed
STATE v. SHIV ALIK AGRO POLY PRODUCTS [MA THUR, J.] 397

by the State Government in the notification for the registration of documents A
and that the registration fee charged was perfectly justified.

3. The Senior Sub-Judge, Solan, decreed the suit and declared the
notification dated 14.4.1969 issued by the State Government prescribing the
registration fee to be null and void and also passed a decree for refund of .B
Rs. 27,771 in favour of the plaintiffs, which was affinned in appeal by the
District Judge and also in Second Appeal by the High Court. The main
ground on which the plaintiffs' suit has been decreed is that there is a
distinction between tax and fee. Fee is levied for certain services given to
individuals and the amount realized has to be eannarked to meet the expenses
incurred in rendering the services and the amount should not go to the general c
pool nor should be spent for any other purposes. The State had not led any
evidence to show that the amount realized by way of registration fee is
deposited under a separate head and that it is exclusively utilized for the
maintenance of the registration department. In absence of any evidence,
the conclusion was inevitable that the amount realized was put in
D
the Consolidated Fund of the State Government and was being utilized by
the government for general purposes. Placing reliance upon Commissioner
Hindu Religious Endowments Madras v. Sri Lakshmindra Thirtha Swamiar
of Sri Shirur Mutt, AIR (1954) SC 282, (for short 'Shirur Mutt case') a
conclusion has been drawn that it is a tax and not a fee and consequently
the impugned notification is ultra vires the Registration Act. E

4. The principal question which requires consideration in the present
appeal is whether the notification issued by the State Government on
14.4.1969 prescribing the registration fee on a graduated fonn on the basis
of value of subject matter of the ins.trument is in accordance with the spirit F
of section 78 of the Registration Act and is valid in law.

5. By the very nature of things recognition of rights or title over
immovable property and transactions therein give rise to manifold problems.
Movable property, depending upon its size or dimension, can be kept in
absolute control in possession of its owner and a third party may not be in G
a position even to know where the same has been kept. But this is not so
for an immovable property which lies in the open attached to the earth at a
particular place and the owner may be residing at a far away place. The

- owner may give the property on lease or licence to someone else who may
get physical possession thereof and enjoy the usufruct thereof. In order to H
398 SUPREME COURT REPORTS (2004] SUPP. 4 S.C.R.

A get over this difficulty, a system ofregistration of title to immovable property
has been evolved which is followed in many countries. In the United States
the legal position has been described as under in Vol. 76 Corpus Juris
Secundum Page 52 5:

"Systems looking toward the registration of titles to Ia.id, as
B distinguished from the practice under recording acts generally of
recording or registering the evidence of such title, are in effect by
virtue of statute in several of the United States, and the courts are
bound by such provisions rather than by any doctrine of the common
law which is in contravention thereof. These systems are quite
c generally known as "Torrens systems" and the statutes providing
therefore as "Torrens acts" from the name of the author of the
Australian Act of 1857, the underlying principle of which they
follow. These systems are limited in their application to titles .to
land.

D The predominant object of such legislation is the establishment·
of a method whereby the title to a particular tract or parcel of real
estate will always be ascertainable by reference to a register of
conclusive veracity, maintained by the designated public official. In
other words, the purpose of these laws is to simplify the transfer of
E real estate, and to render titles thereto safe and indefeasible through
the registration of such titles, the bringing together in one place of
all of the facts relative to the title to each particular tract which is
registered, and the use of certificates which shall conclusively show
at all times the state of such title and the person in whom it is vested.
The Torrens system serves a broader purpose than merely to notify
F the record owner of instruments affecting the title; it is notice to
all the world of the condition of the title.

6. The position in the United Kingdom has been described in Vol.26
G
Halsbury's Laws of England Paras 701 and 705 as under:

"701. Legislation referable to centrallymaintained register. The
legislation relating to registration of the title is directed to the
manner in which the law and practice of conveyancing are to be
H adapted to the use of a centrally maintained register of title to land.
STATE v. SHIVALII( AGRO POLY PRODUCTS [MA THUR, J.] 399

As the use of the register has been extended, so the successive A
statutes mark the historical development of a system of conveyancing,
commonly known as registered conveyancing, which approached
maturity as part of the real property legislation of 1925.

The result of that legislation, as respects registered land, is to
B
produce on first registration a state insured record of entitlement to
legal estates in land, open to public inspection, which is to
be kept up to date in respect of subsequent transactions in accordance
with the conveyancing technique for which the legislation provides.

Indirect reference to the earlier legislation is found at the c
commencement of the Land Registration Act 1925 in the provision
that requires the Chief Land Registrar to continue to keep a register
of title to freehold and leasehold land.

705. The Land Registry Act, 1862. The Land Registry Act, 1862 D
marked the first attempt to introduce registration of title as distinct
from registration of deeds by memorial. Registration was on a
voluntary basis and subject to conditions, which included conditions
(1) that a marketable title should be shown; (2) that the boundaries
of the land should be officially determined and defined as against
adjoining owners; and (3) that partial interests should be disclosed E
and registered. The Act continues to apply to estates registered
under it as if the Land Registration Act, 1925 had not been passed,
until such time as those estates are registered pursuant to the Act
of 1925. The intention that the registration of such estates is to be
transferred to the modern register is confirmed by power F
given to the Lord Chancellor to provide by order that all titles
registered under the Land Registry Act, 1862 should be registered
under the Land Registration Act, 1925 without cost to the parties
interested."

7. The law relating to transfer of immoveable property in India is G
contained in the Transfer of Property Act, 1882. Section 54 of this Act
defines "sale" and it provides that transfer of ownership in the case of
intangible immoveable property of the value of one hundred rupees and
upwards can be made only by a registered instrument. Section 107 provides
that a lease of immoveable property from year to year, or for any term H
400 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A exceeding one year or reserving a yearly rent, can be made only by a
registered instrument. Similarly, section 123 provides that a gift of immoveable
property must be effected by a registered instrument. Section 17 of the
Registration Act gives a long list of instruments for which registration is
compulsory and clause (b) of sub-section (1) provides that non-testamentary
B instruments ~hich purport or operate to create, declare, assign, limit or
extinguish, whether in present or in futl!re, any right, title or interest, whether
vested or contingent, of the value of one hundred rupees and. upwards, to or
in immoveable property must be registered. These statutory provisions
indicate the. importance of registration of documents. In fact, it will be
impossible to have any transaction relating to immoveable property in any
c manner like transfer, gift, gi_ving on lease or creating a mortgage, etc. without
a system ofregistration of documents. For smooth functioning of the system,
the Registration Act has cast certain duties and obligations upon the State
Government. Section 3 enjoins that the State Government shall appoint an
officer to be called the Inspector General of Registration. Section 5 enjoins
D that for the purpose of the Act, the State Government shall fonn districts and
sub-districts and the dis!ricts and sub-districts so fonned together wiJh the
l.imits thereof, and also every alternation of such limits, shall be notified in
the Official Gazette. Section 7 enjoins that the State Government shall
establish in every district an office to be styled the office of the Registrar
and in every sub-district an office or offices to be styled the office of the Sub-
E Registrar. Section 6 enjoins the State Government to appoint Registrars and
Sub-Registrars. Section 16 enjoins the State Government to provide for every
registering officer the books necessary for the purposes of the Act and further
in each district suitable provision for the safe custody of the records
connected with the registration of documents in such districts. By amending
F Act No. 48 of 2001, section l 6A ( 1) has been inserted in the Act. This section
provides that notwithstanding anything contained in section 16, the books
provided under sub-section (1) of that section may also be kept in computer
floppies or diskettes or in any other electronic fonn in the manner and subject
to the safeguards as may be prescribed by the Inspector General with the
sanction of the State Government. The office of Sub-Registrar has naturally
G to be provided with other staff· like clerks and other persons for carrying on
various kinds. of. works which are associated with the registration of
documents, which involve recording the contents thereof in the register
maintained for the purpose, issuing certified copies and giving replies to the
search applications. The State Govern'!1ent has to incur considerable
H expenditure in maintaining the offices of Sub-Registrars which are nonnally
STATE v. SHIVALIK AGRO POLY PRODUCTS [MATHUR, J.] 401

located at the headquarters of a sub-division in a district and in payment of A
salaries to the staff functioning therein.

8. The District Court and also the High Court have decreed the
suit on the finding that the registration fee charged for registration of
the documents is a tax and not fee and, therefore, it is ultra vires
Section 78 of Registration Act and for holding so reliance has been placed
B
upon the decision of this Court rendered in Shirur Mutt case AIR (1954) SC
282.

In the said decision the indicia of fee was explained as under in paras
44 and 45 of the reports : c
"A fee is generally defined to be a charge for a special service
rendered to individuals by some governmental agency. The amount
of fee levied is supposed to be based on the expenses incurred by
the Government in rendering the service, though in many cases the
costs are arbitrarily assessed. Ordinarily, the fees are uniform and D
no account is taken of the varying abilities of different recipients to
pay."

And the distinction between a tax and fee was stated in the following
manner in para 45 of the reports :
E
"The distinction between a tax and a fee lies primarily in the
fact that a tax is levied as a part of a common burden, while a fee
is a payment for a special benefit or privilege. Fees confer a special
capacity, although the special advantage, as for example in the case
ofregistration fees for documents or marriage licences, is secondary F
to the primary motive of regulation in the public interest, vide
Findlay Shirras on 'Science of Public Finance',
Vol I, page 202. Public interest seems to be at the basis of all
impositions, but in a fee it is some special benefit which the
individual receives. As Seligman says, it is the special benefit
accruing to the individual which, is the reason for payment in the
G
case of fees; in the case of a tax, the particular advantage if it exists
at all is an incidental result of State action."

Later, in paragraphs 46 and 47, it was observed that there is really no
generic difference between the tax and fees and as said by Seligman, the H
402 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A taxing power of a State may manifest itself in three different forms known
respectively as special assessments, fees and taxes. Since a fee is regarded
as a sort of return or consideration for services rendered, it is absolutely
necessary that a levy of fee should, on the face of the legislative provision,
be correlated to the expenses incurred by Government in rendering the
B services. If the money thus paid is set apart and appropriated specifically
for the performance of such work and is not merged in the public revenues
for the benefit of the general public, it could be counted as fees and not a
tax.

9. After independence of the country the Governmental functions
C increased manifold and various legislations were enacted and schemes were
introduced for upliftment of the society. Many measures were introduced
which contained provisions for imposing compensatory and regulatory fees.
It was realized that the indicia of fee indicated in Shirur Mutt case was too
technical and rigid and was not in tune with the requirement of the prevailing
social conditions. The characteristics of tax and fee were then examined in
D
considerable detail by a three Judge Bench in Sreenivasa General Traders.
v. State of Andhra Pradesh, AIR (1983) SC 1246 and in paragraphs 30 and
31 of the judgment, the Court held as under:

"The traditional view that there must be actual quid pro quo
E for a fee has undergone a. sea of change subsequent to decision in
AIR 1980 SC 1008. Correlationship between the levy and the
services rendered/expected is one of general character and not of
mathematical exactitude. All that is necessary is that' there should
be a "reasonable relationship" between the levy of the fee and the
services rendered. Moreover, there is no generic difference between
F
a tax and a fee. Both are compulsory exactions of money by public
authorities. Compulsion lies in the fact that payment is enforceable
by law against a person in spite of his unwillingness or want of
consent. A levy in the nature of a fee does not cease to be of that
character merely because there is an element of compulsion or
G' 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 is now
increasingly realized that merely because the collections for the
services rendered or grant of a privilege of licence are taken to the
consolidated fund of the State and not separately appropriated
H
STA TE v. SHIV AUK AGRO POLY PRODUCTS [MATHUR, J.] 403

towards the expenditure for rendering the service is not by itself A
decisive. It is also increasingly realized that the element of quid pro
quo in the strict sense is not a sine qua non for a fee."

It is necessary to mention here that the observation made in para 4 7 of
the judgment in the Shirur Mutt case that "If the money thus paid is set apart B
and appropriated specifically for the performance of such work and is not
merged in the public revenues for the benefit of the general public, it could
be counted as fee and not a tax" may not be very accurate at least where the
fee is being realized by the Government, Central or State, in view of a
constitutional provision. Article 266 of the Constitution provides that all
revenues received by Government of India, all loans raised by that Government C
by the issue of treasury bills, loans or ways and means advances and all
moneys received by that Government in repayment of loans shall form one
consolidated fund to be entitled "the Consolidated Fund of India", and all
revenues received by the Government of a State, all loans raised by that
Government by the issue of treasury bills, loans or ways and means advances D
and all moneys received by that Government in repayment of loans shall
form one consolidated fund to be entitled "the Consolidated Fund of the
State". In view of this specific provision any amount realized by way of fee
by the Central Government or State Government has to be credited to
Consolidated Fund of India or of the concerned State, as the case may be,
and will thus necessarily get merged in the public revenues and cannot be E
set apart.

10. In Sreeniwasa General Traders (supra) the Court took note of the
fact that presumably the attention of the Bench hearing Shirur Mutt case was
not drawn to Article 266 of the Constitution. It was further observed therein
F
that the Constitution nowhere contemplates it to be an essential element of
fee that it should be credited to a separate fund and not to a consolidated fund.

11. In Municipal Corporation of Delhi and Others v. Mohd. Ya!> in, AIR
(1983) SC 617, it was held that compulsion is not the hallmark of the
distinction between a tax and a fee. That the money collected does not go G
into a separate fund but goes into the consolidated fund does not also
necessarily make a levy a tax. Though a fee must have relation to the
services rendered, or the advantages conferred, such relation need not be
direct; a mere casual relation may be enough. It was further held that it is
neither necessary nor expedient to weigh too meticulously the cost of the H
404 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A services rendered etc., against the amount of fees collected so as to evenly
balance the two. A broad correlationship is all that is necessary. Quid pro
quo in the strict sense is not the one and only true index of a fee; nor is 1t
necessarily absent in a tax.

12. The same question was again examined in considerable detail in
B
Krishi Upaj Mandi Samiti and Others v. Orient Paper & Industries Ltd.,
[1995] 1 SCC 655. Here, it was held that it is not always possible to workout
in mathematical precision the amount of fee required for the services to be
rendered each year and to collect just that amount which was sufficient for
meeting the expenditure in that year. Every correlationship between the levy
C and the services rendered is one of general character and not a mathematical
exactitude. All that is necessary is that there should be a reasonable
relationship between the levy of fee and the services rendered. There is no
postulate of a fee that it must have a direct relation to the actual services
rendered by the authority to each individual to obtain the benefit of a service.
D It was further observed that it. is now increasingly realized that merely
because the collections for the services rendered or for 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 of the nature of the levy whether it is ·a fee or a tax.

E 13. Secretary to Government of Madras and Another v. P.R. Sriramulu
a
and Another, [1996] I SCC 345 is a dedsion rendered by Bench of three
learned Judges and the appeal was directed against the judgment of the High
Court of Madras wherein Schedule (I) to the Tamil Nadu Court Fees and
Suits Valuation Act, 1955 and sub"rule (1) ofRul~ l of Order II of the High
Court Fees Rules, 1956 based on Article (1) of Schedule (1) of Madras Act
F
No .. XIV of 1955 were he.Id to be invalid in so_ far as they related to the levy
of court fees on ad valorem scale. The Court observed that the administration
of justice is one of the main functions of the State. It is alSo a fact that the
functiOn of the State in the modem time has become too expensive in
encompassing a large area of activity. The State has not only to maintain
G a system of administration of justice, but also the maintenance of law and
order. It has also .to provide a system to enable its citizen to canvass their
rights against the wrong done to them as well as to the State itself. It is for
these reasons that the State came forward to levy fee by legislative amendments
in order to cover up the expenses towards pay, allowances and pensions of
H j'µdicial officers and .establishment staff, their residential accommodations,
STATE v. SHIVALIK AGRO POLY PRODUCTS [MATHUR, J.] 405

court buildings, repairs and maintenance as well as other expenses under A
various heads mainly engaged and employed for the administration of justice.
After taking note of the observation in Om Prakash Agarwal v. Giri Raj
Kishori, [1986] 1 SCC 722, that in determining a levy as fee the true test
must be whether its primary and essential purpose is the rendering of specific
services to a specified area or class, it being of no consequence that the State B
may ultimately and indirectly be benefited by it, it was held that if a broad
and general correlation between the totality of the fee on the one hand and
the totality of the expenses of the services on the other is established, the levy
will not fail in its essential character of a fee on the ground alone that the
.. measure of its distribution on the persons or.incidence is disproportionate to
the actual services obtainable by them. The test of the correlationship is not C
in the context of the individual contributors, the test is on the comprehensive
level of the value of the totality of the services, set off against the totality
of the receipts. Accordingly, it was held that the test of correlation is to be
reckoned at the aggregate level and not at the individual level. On these
principles the appeal was allowed and the judgment of the High Court was D
set aside.

14. In a recent judgment rendered in Bombay Stock Exchange Brokers'
Forum v. Securities and Exchange Board of India, [2001] 3 SCC 482 by
a Bench of three learned Judges, the challenge levelled against the registration
fee levied by the Securities and Exchange Board of India on Stock Brokers E
came up for consideration. The Bench after review of a number of earlier
decisions, including Constitution Bench decision in Shirur Mutt case (supra),
took note of the fact that in determining whether a levy is a fee or not,
emphasis must be on whether its primary and essential purpose is to render
specific services to a specified area or a class and if in that process it is found F
that the State ultimately stood to benefit indirectly from such levy, the same
is of no consequence. After examination of the relevant Act and the
Regulations, the Court held that since the amount collected under the levy
account in the said case was being spent by the Board on various activities
of the Stock and Securities market with which the petitioners are directly
connected, the fact that the entire benefit of the levy does not accrue to the G
contributors i.e. the petitioners, would not make the levy invalid.

15. It will be thus seen that the statement of law made in Shirur Mutt
case (supra) regarding the attributes offee has undergone a sea change. The
consistent view now is that there is no generic difference between a tax and H
406 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A a fee which are both compulsory exaction of money by public authorities.
The correlationship between the levy and the services rendered should be one
of general character and not of mathematical exactitude. Further, the broad
and general correlationship between the totality of the fee on the one hand
and the totality of the expenses of the services on the other, will be sufficient
to justify the levy. The levy will not fail only on the ground that the measure
B ...
' of its distribution on the persons or incidence is disproportionate to the actual
· services rendered by them. The true test being the comprehensive level of
the value of the totality of the services set off against the totality of the
receipts. The character of the fee is thus established. The vagaries in its
distribution amongst the class do not detract from the concept of a fee as such.
c '
16. The subject matter of challenge in the present case is registration
fee which has been fixed by the State Government in exercise of power
conferred by Section 78 of the Registration Act. The said provision reads
as under:
D "78. Fees to be fixed by State Goverr.ment. - The State Government
shall prepare a table of fees payable -

(a) for the registration of documents;

(b) for searching the registers;
E
(c) for making or granting copies of reasons, entries or
documents, before, on or after registration;

and of extra or additional fees payable -
F
(d) for every registration under section 30;

(e) for the issue of commissions;

(f) for filing translations;
G
(g) for attending at private residences;

(h) for the safe custody and return of documents; and

(i) for such other matters as appear to the State Government
H necessary to effect the purposes of this Act".
STATE v. SHIV AUK AGRO POLY PRODUCTS [MA THUR, J.] 407

17. The fixation of registration fee under Sub-section (a) on a graduated A
scale depending upon the value or consideration for which the instrument has
been executed may be on the higher side. However, the fee for various other
items enumerated in sub-sections (b) to (i) is very small, though the State
has to incur a considerable amount of expenditure for the same. The high
value transactions are generally in big cities where :he value of the property B
is high and not in small towns or in rural areas. Nevertheless, the State
Governments have to maintain offices of Sub-Registrars in small sub-
divisional towns and post staff which has to be paid salaries. Rules have been
framed by various State Governments which lay down elaborate procedure
for maintenance of Books and Registers wherein copies of registered
documents have to be kept. This necessarily requires trained ma~power ·C
entailing expenditure in payment. of their salary.

18. There is no material on record to show that the overall amount
received by the Government by way of fee from the Registration department
far exceeds the overall expenditure incurred in maintaining the said department. D
The High Court and also th~ District Court merely took into consideration
the registration fee paid by the plaintiffs and did not at all examine whether
there was any substantial discrepancy between the total amount of fee
realized by the registration department and the total amount of expenditure
incurred by the government in the maintenance and functioning of the
department. The notification issued by the State Government could not be E
struck down merely .by taking into consideration the registration fee paid by
the plaintiffs and quantification of the value of services rendered to them.

19. Learned counsel for the respondents has placed reliance upon The
Delhi Cloth and General Mills Co. Ltd and Others v. The ChiefCommissioner, F
Delhi and Another, AIR (1964) Punjab 492, State of Uttar Pradesh v. The
District Registrar, Meerut and Another, AIR (1971) Allahabad 390 and The
Chief Commissioner, Delhi and Another v. The Delhi Cloth and General
Mills Co. Ltd and Others, AIR (1978) SC 1181 (which is a decision by a
bench of two learned Judges in appeal preferred against the judgment
reported in AIR (1964) Punjab 442 in support of his contention that the G
notification issued by the State Government prescribing the registration fee
in tabulated form is illegal. It is not necessary to examine these cases in detail
as in all these cases reliance has been placed upon Shirur Mutt case (supra)
for holding that there must be an element of quid pro quo and that the fee
realized must be correlated and must be spent for the purposes of imposition. H
408 SUPREME COURT REPORTS [2004] SUPP. 4 S.C.R.

A As discussed above, the view taken in Shirur Mutt case (supra) has undergone
a considerable change by subsequent decisions of this Court. Moreover,
having regard to the express language used in Article 266 of the Constitution,
it is not possible for the State Government to keep the fee realized in a
separate fund other than the Consolidated Fund of the State. In view of the
B subsequent decisions of this Court, the view taken in the decisions relied upon
by learned counsel for the plaintiff-respondents cannot be considered to be
good law and they are hereby overruled. ·

20. For the reasons discussed above, the appeal· is allowed with costs.
The judgment and decree passed by the High Court and also by the District
C Judge and Senior Sub-Judge, Solan, are set aside and the suit filed by the
plaintiff-respondents is dismissed.

V.M. Appeal allowed.