THE SECRETARY TO GOVERNMENT OF MADRAS AND ANR.versusP.R. SRIRAMULU AND ANR.

       THE SECRETARY TO GOVERNMENT OF MADRAS AND ANR.                             A
                                          v.
                          P.R. SRIRAMULU AND ANR.

                               NOVEMBER 22, 1995
                                                                                  B
       [S.P. BHARUCHA, FAIZAN UDDIN AND S.B. MATMUDAR, JJ.]

             Tamil Nadu Cowt Fees and Suit Valuation Act, 1955-Levy of Court
      fee on ad-valorem scale without upper limit-Validity-Essential characters
      of fee-Feasibility of a fixed maximum chargeable fe~eed for unifonnity
      in scales of Court fees through country-Economic and social policy of       C
       State-Court's power to inteifere.

             The respondents No. 1 and 2 challenged the validity of the provisions
      of levy of Court Fees and Suit Valuation Act of 1955 with reference to levy
      of Court Fees ad-valorem working out at the rate of 7 1/2 percent without D
      upper limit by contending that the levy was not only exorbitant but wholly
      arbitrary, unreasonable and unjustified bearing no relationship to the cost

...   of administration of justice; that it was not a levy of Court fee but really
      a levy of tax though purporting to be a levy of fee; that the Court fees must
      be related to the cost of administration of justice and cannot be used as a
      means of taxation for the purpose of raising the revenue to the Govern- E
      ment for its general administration; that the pattern of levy of Court fees
      prior to 1955 was only to levy an ad-valorem fee up to a certain limit and
      thereafter the fee was on a reduced scale and that the scale of fees in other
      States of the country are also on different basis and not on the basis of
      ad-valorem fee without limit.                                                 F
            The High Court allowed the writ petitions and appeal and struck
      down Article (1) in Schedule (1) to the Tamil Nadu Court Fees and Suits
      Valuation Act, 1955 and Sub-rule (1) of Rule (1) of Order II of the High
      Court Fees Rules 1956 based on Article (1) of Schedule (1) of Madras Act
      No. XIV of 1955, and held them to be invalid in so-far-as they relate to the G
      levy of Court Fees on ad-valorem scale. The High Court held that the levy
      of ad-valorem flat rate of 7 1/2 percent without any upper limit would be
      unreasonable because where the cost of service had to be distributed
      between several persons, it would not be equitable and reasonable if the
      fees were so fixed that the whole costs or a grossly disproportionate part H
                                          551
    552                    SUPREME COURT REPORTS. [1995] SUPP. 5 S.C.R.

A   of it was imposed on a particular section of litigants.

           In appeal, this Court set aside the judgment of the High Court and
    remitted the matter back to the High Court considering that the appeal
    could not be disposed of without giving opportunity to the respondent to
    file an affidavit or affidavits in reply to the supplemental counter affidavit.
B   After remand, the High Court while striking down the provisions held that
    there was no idea of quid pro quo in the levy at the rate of 7 1/2 percent
    flat rate without limit as there was no necessity to raise the Court Fees as
    compensation for the cost of service rendered and to meet any increased
    cost in the administration of civil justice and there was no principle of
C   rationalisation justifying demand at a fixed rate; that considering the
    circumstances the impost inherently bears within it more the concept of
    tax than fee and the levy imposing, as it does, on a particular section of
    litigants is grossly dis- proportionate to the burden and the same is
    unreasonable and arbitrary; that the expenditure incurred by the Govern-
    ment could not be debited to the cost of administration of justice which
D   the litigants can be required to compensate and that the expenditure in
    the administration of Criminal Justice is also not debitable to the cost of
    administration of Civil Justice in Court and that the record indicated that
    for the year 1955-56 the State was making a profit varying between 9 to 21
    lakhs. This appeal had been filed against the judgment of the High Court.
E
           The questions raised for consideration were : (i) what is the nature
    of the Fees taken in Court within the meaning of Entry 3, List II, in 7th
    Schedule of the Constitution; (ii) Whether it is a colourable exercise of
    legislative power, in as much as the State in fact is raising tax under the
    guise of levying a fee because the levy is excessive to such an extent as to
F   be a pretence of a fee but it is not a fee in reality? (iii) whether the levy of
    Court Fees on ad valorem basis without an upper limit renders the impost
    a tax; (iv) Whether the impugned impositions are fees.

          Allowing the appeal, this Court
G        HELD : 1.1. If the essential character of the levy is that some social
  service is intented a quid pro quo to the class of citizens which is intended
  to be b~11efited by the service and a board and general correlation between
  the amount so collected and the expenses incurred in providing the ser-
  vices is found to exist, then such levy would partake the character of a "fee",
H irrespective of the fact that such special services for which the amount by
          SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU                    553

levy of fee is collected incidentally and indirectly benefit the general public A
also. In order to establish the correlation between the amount recovered
by way of "fee" and the expenses incurred in providing the service they
should not be examined so minutely or be weighed in golden scale to
discern any difference between the two. It is not necessary to ascertain the
same with any mathematical exactitude for finding the correlation but the
                                                                                B
test would be satisfied if a broad and general correlation is found to exist
and once such a broad correlation between the totality of the expenses on
the services rendered as a whole, on the one hand and the totality of the
amount so raised by way of the fee, on the other is established, it would be
no part of the legitimate exercise in the examination of the constitutionality
of the concept of the impost to emark upon its effect in the individual cases.  c
If the aforesaid relation is found to exist in the levy of the fee, the levy
cannot be said to be wanting in its essential character of a fee on the
ground that the measure of its distribution on the persons or incidence is
disproportionate to the actual services made available to them. The cor-
relation is not in the context of individual contributors, the test being its D
ascertainment on a comprehensive basis keeping in view the va!ue of the
totality of the service, qua, the totality of receipts. [566-A-G]

       1.2. The State employs the widest latitude where measure of
economic regulations are concerned. These measures for fiscal and
economic regulation involve an evaluation of diverse and quite often            E
conflicting economic criteria, adjustment and balancing of various con-
flicting social and economic values and interests. It is for the State to
decide what economic and social policy it should pursue. It is settled law
that in view of the inherent complexity of the fiscal adjustment, the Courts
give a large discretion to the legislature in the matter of as preferences of   F
economic and social policies and effectuate the chosen system in all
possible and reasonable ways. If two or more methods of adjustment of an
economic measure are available, the legislative, preference in favour of one
of them cannot be questioned on the ground of lack of legislative wisdom
or that the method adopted is not the best or there are better ways of          G
adjusting the competing interests and the claims as the legislature posses-
ses the greatest freedom in such area. Lack of perfection in a legislative
measure does not necessarily imply its constitutionality as no economic_
measure has so far been discovered which is free from all discriminatory
impacts and that in such a complex area in which no full proof device
exists, the Court should be slow in imposing strict and rigorous standard       H
    554                    SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A of scrutiny by reason of which all local fiscal schemes may be subjected to
    criticism under Equal protection clause. (567-A-E]

           Govt. of Madras v. Zenith Lamps, AIR (1973) SC 724; Om Prakash v.
    Gili Raj Kishori, AIR (1986) SC 726 and P.M. Ashwanatha Narayana Setty
    v. State of Kamataka, [1989] Suppl. 1 SCC 696, relied on.
B
          13. There could not be any scientific method by which the levy of fee
    may be made exactly corresponding to the expenditure in a particular year
    relating to the administration of civil justice. Some fluctuations are bound
    to occur in respect of the recoveries by levy of fee and the expenditure on
C   administration of civil justice. It is also not the requirement of law that the
    collection raised through the levy should exactly tally or correspond to the
    expenditure in the administration of civil justice. The co-relation between
    the amount raised through the fee and the expenses incurred in providing
    the services should not be examined with exactitude with a view to ascertain
    any accurate and arithmetical equivalence but the test would be satisfied if
D   a broad and general correlation is found to exist. Even if the recoveries
    during the period from 1955-65 were in excess to the tune of about Rs. 9 to
    21 lacs per year, the levy would not fail on that account because once it is
    established that the primary and essential purpose is the rendering of
    specific services to a specified class, it becomes immaterial that the State
    has earned certain benefits out of it indirectly. [568-B-E]
E
           1.4. It is difficult to find any proper basis or formula to separate the
    charges of civil and criminal administration of justice when civil and
    criminal Courts are generally not distinct but both functions are dis-
    charged by the same Judicial Officer. It is not only difficult rather impos-
F   sible to ascertain as to how much public time was spent by a Judicial
    Officer while dealing with criminal matters and how much time was spent
    while dealing with civil matters so as to come to a definite conclusion that
    any surplus much less sizeable surplus is left out of the receipts derived
    from Court Fees after meeting the actual expenditure in administration of
G   civil justice. (568-G-H; 569-A)

          1.5. Having regard to the changing social and economic conditions
    of the country and the threats of frequent inflationary trends hovering
    around, the levy of Court Fees cannot remain static and has to be amended
    according to the requirements of the times. The increase in the Court Fees
H   has to be appreciated having regard to the increased need of the revenue
    SECRY. TO oovr. OFMADRASv. P.R SRIRAMULU [FAIZANUDDIN,J.) 555

by reason of the increased cost of the administration of justice. [569-C-D]   A
      1.6. The administration of justice is a service which the State is
under an obligation to render to its subject. The amount raised from the
suitors by way of fee should not normally exceed the cost of the administra-
tion of justice because, possibly there could be no justification with the
State to enrich itself from High Court fees or to secure revenue for general B
administration. The total receipts from the Court Fees should be such as
by and large can cover the cost of administration of justice. There should
also be some measure of uniformity in the scales of Court Fees throughout
the country as there appears to be a vast difference in the scales of Court
Fees in various States of the country. The feasibility of a fixed maximum . C
chargeable fee also deserves serious consideration. [570-G-H; 571-A]

      All India Judges Association v. Union of India, [1992) 1 SCC 119,
relied on.

     CIVIL APPELLATE JURISDICTION : CIVIL APPEAL NO. 736                      D
OF 1975.

     Certificate from the Judgment and dated 3.3.75 of the Madras High
Court in W.P. No. 749 of 1966.

                                   With                                       E
      Writ Petition No. 1390 of 1987.

      (Under Article 32 of the Constitution of India.)

     A.K. Ganguli, Rajesh Mahale and P. Mahale for the Appellant &            F
Respondent in C.A. No. 736/75 & W.P. No. 1390/87.

      A.T.M. Sampath for the Respondent in C.A. No. 736/75.

      G.L. Sanghi, O.C. Mathur and Mrs. Meera Mathur for JBD & Co.
for the Petitioner in W.P. No. 1390/87.                                       G

      The Judgment of the Court was delivered by

      FAIZAN UDDIN, J. 1. The appeal by certificate granted by the High
Court fl.as been directed against the Judgment dated, March 3, 1975
delivered by the High Court of Madras in Writ Petition No. 749/1966 P.R.      H
    556                   SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.             ....
A Sriramulu & Anr. v. The Secretary to the Govemment of Madras. Home
    Department alongwith a group of other Writ Petitions and Civil Appeals,
    declaring Article (1) in Schedule (1) to the Tamilnadu Court Fees and
    Suits Valuation Act, 1955 and Sub-rule (1) of Rule (1) of Order II of the      ..
    High Court Fees Rules. 1956 based on Article (1) of Schedule (1) of
    Madras Act No. XIV of 1955, to the invalid in so-far-as they relate to the
B   levy of Court Fees on ad-valorem scale.

         2. The facts in brief leading to the aforesaid appeal are that certain
  lands belonging to the respondents No. 1 and 2 herein situated in Tondiar-
  pet were acquired at the instance of Public Works Department in respect
c of which award No. 6 and 8 both of 1962 were made on 5.3-.1962 and
  10.3.1962. On a reference made under Section 18 of the Land Requisition
  Act, at the instance of respondents No. 1 and 2, IVth Assistant City Civil
  Judge, Madras enhanced the compensation. The respondents being dis-
  satisfied preferred appeals to the High Court for further enhancement of
  the compensation. The Court Fee payable according to Madras Court Fees
D and Suits Valuation Act, 1955 on such appeals was an ,ad-valorem Court
  Fee at the rate of 7 1/2 per cent of the total claim without any upper limit
  for such levy irrespective of the amount. The respondents No. 1 and 2             '•
  challenged the validity of the aforesaid provisions of levy of Court Fees and
  Suits Valuation Act of 1955 with reference to levy of Court Fees ad-
E valorem working out at the rate of 7 1/2 per cent without upper limit by
  contending that the levy is not only exorbitant but wholly arbitrary, un-
  reasonable and unjustified bearing no re1ationship to the cost of ad-
  ministration of justice and that in fact it was not a levy of Court Fee but
  really a levy of tax though purporting to be a levy of fee. The respondents
F took the stand that the Court Fees must be related to the cost of ad-
  ministration of justice and cannot be used as a means of taxation for the
  purpose of ·raising the revenue to the Government for its general ad-
  ministration. Respondents further took the stand that the pattern of levy
  of Court Fees prior to 1955 was only to levy an ad-valorem fee up to a
  certain limit and thereafter the fee was on a reduced scale and that the
G scale of fees in other States of the country are also on different basis and
  not on the basis of ad-valorem fee without limit. The said provisions
  therefore, were sought to be declared invalid.
                                                                                        -
         3. One Mr. Kelu Eradi, Joint Secretary to the Government of Tamil
H   Nadu had filed the counter affidavit on behalf of the State supporting the
   SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU [FAIZANUDDIN,J.J 557


levy of ad-valorem Court Fees and opposing the writ petitions. However, A
at the arguments stage one Mr. J. Shiva Kumar, Deputy Secretary to the
Government also filed a supplementory counter affidavit dated 11.10.1966
on behalf of the Government but the High Court did not take into account
the said supplementory counter affidavit and decided with petitions. Rely-
ing on the principles laid down in C01poration of Madras v. Spencer & Co.
                                                                           B
the High Court allowed the group of writ petitions and appeal and struck
down the afore-mentioned provisions by taking the view that the levy of
ad-valorem flat rate of 7 1/2 per cent without any uper limit would be
unreasonable, because where the cost of service had to be distributed
between several persons, it would not be equitable and reasonable if the
fees were so fixed that the whole cost or a grossly dis-proportionate part C
of it was imposed on a particular section of litigants. The said judgment
was challenged before this Court in appeal. This Court allowed the appeal
and set aside the judgment of the High Court and remitted the matter back
to the High Court with the following observations;

        "It seems to us that we cannot dispose of this appeal without giving D
        opportunity to the respondents to file an affidavit or affidavits in
        reply to the supplemental counter affidavit dated October 11, 1966
        because if we take the figures as given and explained by the
        Advocate-General we cannot say that the State is making a profit
        out of the administration of civil justice. Various items both on the E
        receipt side and the expenditure side have to be carefully analysed
        to see what items or portion of items should be credited or debited
        to the administration of civil justice;

        It is true, as held by the High Court, that it is for the State to
        establish that what has been levied is Court fee properly so called   F
        and if there is any enhancement the State must justify the enhan-
        cement;

        We are accordingly constrained to allow the appeal and set aside
        the judgment passed by the High Court and remit the case to it;
                                                                              G
        We direct that the High Court should give an oppQrtunity to the
        writ petitioners to file an affidavit or affidavits in reply to the
        affidavit dated October 11, 1996. The High Court shall then decide
        whether the in_pugncd fees are the Court fees or taxes on litigants
        or litigation."                                                     H
    558                    SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A          4. After remand by this Court the respondents filed further affidavits
    traversing the supplemental counter affidavit dated October 11, 1966 filed
    by Mr. Shiv kumar on behalf of the Government. After considering the
    affidavits filed on behalf of the parties and the material on record the High
    Court took the view in the impugned judgment that there is no idea of quid
    pro quo in the levy at the rate of 7 1/2 per cent flat rate without limit as
B
    there is no necessity to raise the Court fees as compensation for the cost
    of service rendered and to meet any increased cost in the administration
    of civil justice and that there was no principle of rationalisation justifying
    demand at a flat rate. The High Court further held that considering the
    circumstances the impost inherently bears within more the concept of tax
C   than fee and the levy imposing, as it does, on a particular section of litigants
    is grossly dis-proportionate part of the burden and the same is un-
    reasonable and arbitrary. The expenditure incurred by the Government as
    shown in some of the items, in the opinion of the High Court could not be
    debited to the cost of administration of justice which the litigant can be
D   required to compensate and that the expenditure in the administration of
    criminal justice is also not debitable to the cost of administration of civil
    justice in Courts. The High Court further held that the record indicated
    that for the year 1955-56 the State was making a profit varying between 9
    to 21 lakhs. On the basis of these conclusions the High Court struck down
    Article 1 in Schedule 1 to the Tamilnadu Court Fees and Suits Valuation
E   Act and Sub-rule 1 of Rule 1 of the High Court Rules, 1956 based on
    Article 1 of Schedule 1 to the Madras Act No. 14 of 1955 as invalid against
    which the aforementioned appeal has been directed.

           5. The petitioner in writ petition No. 139/1987 is a Bank. The said
p   Bank had filed a civil suit for recovery of Rs. 6,50,40,605.12 against M/s.
    Mettur Textile Industries Ltd. and Others on which it had to pay Court
    Fee amounting to Rs. 48,78,054.25 on ad-valorem basis at the rate of 7 1/2
    per cent under Article 1 of Schedule 1 of the said Madras Act No. XIV
    of 1955. Certain other money suits were also contemplated by the Bank
    and having learnt that the Civil Appeal No. 736/1975 has been filed in this
G   Court against the Madras judgment, the Bank has also filed the aforesaid
    writ petition under Article 32 of the Constitution of India challenging the
    said levy of Court Fees on the flat rate of 7 1/2 percent ad-valorem, relying
    on the same grounds as are set out in the aforesaid appeal.

H         6. Before we embark upon the points in controversy and respective
..       SECRY. TOGOVf. OFMADRASv. P.R.SRIRAMULU[FAIZANUDDIN,J.) 559

     contentions relating thereto we may briefly trace the history with regard to A
     the levy of Courts Fee in this country on the litigating parties. Before the
     advent of British rule in India the administration of justice was considered
     to be the basis function of the State as guardian of the people without the
     levy of any charge on the party approaching the Court for redress of its
     grievance. As far as the memory goes during the Moghul rule and the B
     period prior to that, there was no fee payable even on administration of
     Civil Justice and the administration of justice was totally free. It was only
     after the British rule that regulations imposing Court Fees were brought
     into existence. In the beginning the imposition of the fee was nominal but
     in the course of time it was enhanced gradually under the impression that
     it would prevent the institution of frivolous and groundless litigation and C
     as an effective deterrent to the abuse of process of the Court without
     causing any impediment in the institution of just claims. However insig-
     nificant this view may be that the levy of fees would have a tendency to put
     a restraint on frivolous litigation that view at any rate had the merit of
     seeking to achieve a purpose which was believed to have some relevance D
     to the administration of justice. Since about past two decades the levy of
     Court Fees on higher scales would seem to find its justification, not in any
     purpose related to the sound administration of justice, but in the need of
     the State Government for revenue as a means for recompense. It may be
     seen that the Central Court Fees Act of 1870 fixed, what may be described
     in view of subsequent happenings, a moderate scale of Court Fees. But the E
     fact may not be lost sight of that after the enactment of the Court Fees
     Act, 1870 the financial needs of the State Governments have multiplied t.o
      a much larger extent. Consequently most of the States have enacted their
      own Court Fees Acts or have amended the original Acts themself beyond
      recognition and thereby have increased the scale of fees to a level which F
      has given rise to the feeling that it is no longer a fee but a heavy tax on the
      litigants.

            7. It cannot be disputed that the administration of justice is one of
     the main functions of the State. It is also a fact that the functions .of the G
     State in the modern times have become too extensive encompassing a,,J.arge
     area of activity. Now the State has not only to maintain system of ad-
     ministration of justice for the maintenance of law and order, but it has also
     to provide a system to enable its citizens to convass their rights against
     wrongs done to them as well as to the State itself, statutory bodies and
     Government Corporations, they being now the largest litigants by reason H
    560                   SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A of the growing tendency of all the States to project themselves into various
    social, economic and industrial spheres of the society, which during pre-
    independence days, was a rare phenomena. It is for all these reasons that
    the States came forward to levy fee by legislative amendments in order to
    cover up the expenses towards the pay, allowances and pensions of judicial
    Officers and establishment staff, their residential accommodations. Court
B   buildings repairs and maintenance thereof as well as provision for
    transport, libraries and stationery, besides other expenses under various
    heads and machinery engaged and employed for the administration of
    justice.

C         8. In the present appeal and writ petition before us, it may be noted
    that the questions that arise out of the arguments addressed to us by the
    learned counsel for the parties, may be formulated as under :

          (1) What is the nature of the Fees taken in Court within the meaning
    of Entry 3, List II, in 7th Schedule of the Constitution. Whether the fee so
D   charged is a tax or a fee?

           (2) Whether it is a colourable exercise of legislative power, in as
    much as the State in fact is raising tax under the guise of levying a fee
    because the levy is excessive to such an extent as to be a pretence of a fee
E   but it is not a fee in reality?

          (3) Whether they levy of Court Fees on ad-valorem basis, without an
    upper limit renders the impost a tax in as-much-as, having regard to the
    very nature of services, which consist of adjudication of disputes, a_ stage
    is inevitably reached wherein after and above an ad-vqlorem levy, the
F   proportionate increase in the value of the subject matter ceases to be a fee
    and becomes a tax?

        (4) Whether the impugned impositions are fees - there being no
  correlation between the services and the levy and because State makes a ·
G profit out of the administration of civil justice as it does not spend the
  entire money on administration of civil justice but also in administration of
  criminal justice and a large surplus is left out even after meeting the
  expenses of the administration of Justice?

          9. We may state here that the aforementioned questions raised before
H us are not new but were raised and agitated earlier also and decided by
    SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU (FAIZAN UDDIN, J.) 561


this Court. In this connection a reference to some of the decisions may be       A
made. In J.M. & M. Industries v. State of Bihar, AIR 1971 SC 1182 this Court
expressed the view that before any levy can be upheld as a fee, it must be
shown that the levy has reasonable correlation with the services rendered
by the Government. In other words the levy must be proved to have a quid
pro quo for the services rendered. But in such matters it will be impossible     B
to have an exact correlationship and that the correlationship expected to
exist is one of a general character and not of arithmetical exactitude. It has
been further observed that the correlationship between the services
rendered and the levy of fee is essentially a question of fact.

       10. A Constitution Bench of this Court while enterpreting Entry 3,        C
List II in Schedule 7 of the Constitution of India, in the case of Govemment
of Madras v. Zenith Lamps, AIR 1973 SC 724 took the view that the fees
taken in Courts cannot be equated with taxes and in paragraph 31 of the
report held as under :

          "In this case we are concerned with the administration of civil D
          justice in a State. The fees must have relation to the administration
          of civil justice. While levying fees the appropriate legislature is
          competent to take into account all relevant factors, the value of
        · the subject matter of the dispute, the various steps necessary in
          the prosecution of a suit or matter, the entire cost of the upkeep E
          of Courts and officers administering civil justice, the vexatious
          nature of a certain type of litigation and other relevant matters. It
          is free to levy a small fee in some cases, a large fee in others,
          subject of course to the provisions of Art. 14. But one thing the
          Legislature is not competent to do, and that is to make litigants
          contribute to the increase of general public revenue. In other F
          words, it cannot tax litigation, and make litigations pay, say for
          road building or education or other beneficial scheme that a Slate
          may have. There must be a broad correlationship with the fees
          collected and the cost of administration of civil justice."
                                                                                 G
Further in the said report this Court also agreed with the following obser-
vations made in ILR (1968) 1 Madras 247 at pp. 340-341 :

         "When a levy is impugned as a colourable exercise of legislative
         power, the State being charge with raising a tax under the guise of
         levying a fee, courts have to scrutinize the scheme of the levy H
    562                    SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A            carefully, and determine whether, in fact there is correlation be-
             tween the services and the levy, or whether the levy is excessive to
             such an extent as to be a pretence of a fee and not a fee in reality.
             If, in substance, the levy is not to raise revenues also for the general
             purposes of the State the mere absence of uniformity or the fact
             that it has no direct relation to the actual services rendered by the
B            authority to each individual who obtains the benefit of the service,
             or that some of the contributories do not obtain the same degree
             of service as others may, will not change the essential character of
             the levy."

C         11. Again in Om Prakash v. Gbi Raj Kishori AIR 1986 SC 726 this
    Court observed in para 10 of the report 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 may ultimately and indirectly be benefitted by
D it.

          12. Apart from the aforementioned decisions the points in controver-
    sy and questions raised before us, as referred to above, are squarely
    covered by a decision of this Court in P.M. Ashwanatha Narayana Setty v.
    State of Kamataka, [1989] Supplt. 1 SCC 696. While dealing with the
E   distinction between a "free" and a "tax" and after reviewing all the earlier
    pronouncements of this Court on the conceptual distinction between a fee
    and a tax, it has been observed in para 35 (page 712 of the report as under:

            "What emerges from these pronouncements is that if the essential
F           character of the impost is that some special service is intended or
            envisaged as a quid pro quo to the class of citizens which is intended
            to be benefitted by the service and there is a broad and general
            correlation between the amount so raised and the expenses in-
            volved in providing the services, the impost would partake the
            character of a "fee" notwithstanding the circumstance that the
G           identity of the amount so raised is not always kept distinguished
            but is merged in the general revenues of the State and not-
            withstanding the fact that such special services, for which the
            amount is raised, are, as they very often do, incidentally or indirect-
            ly benefit the general public also. The test is the primary object of
H           the levy and the essential purpose it is intended to achieve. The
         SECRY. TO GOVT. OFMADRASv. P.R.SRIRAMULU [FAIZANUDDIN,J.]           563

              correlationship between the amount raised through the 'fee' and A
              the expenses involved in providing the services need not be ex-
              amined with a view to ascertaining any accurate, arithmetical
              equivalence or precision in the correlation; but it would be suffi-
              cient that there is a broad and general correlation."
                                                                                    B
-·   In para 66 of the said report while repelling the a_rgurnents with regard to
     the alleged arbitrariness and inequities in the imposition of the ad-valorem
     impost without an under limit this Court in paragraph 67 (page 720) of the
     report observed as follows :

              "The anomalies that the policy behind the impugned provisions can
              produce in conceivable cases could, indeed, be inquitable or even
                                                                                    c
              quite startling. But the argument in the last analysis becomes
              indistinguishable from the contention that the correlation of the
              services to the fee would have to be decided on the basis of how
              the correlation operate in each individual case. It would be an
              insistence on testing the conceptual nature of the fee on the basis D
              of the degree of the quid pro quo in the case of each individual
              payer of the fee. That is the peccant part of the argument. Once
              a broad correlation between the totality of the expenses on the
              services, conceived as a whole, on the one hand and the totality of
              the funds raised by way of the fee, on the other, is established, it E
              would be no part of the legitimate exercise in the examination of
              the constitutionality of the concept of the impost to embark upon
              its effect in individual cases. Such a grievance would be one of
              disproportibnate nature of the distribution of the fees amongst
              those liable to contribute and not one touching the conceptual
              nature of the fee."                                                  F
     It has been further observed in para 72(page 721) of the said report as
     under:

               "What emerges from the foregoing discussion is that when a broad G
               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 argument that where the levy, in an H
    564                   SUPREME COURT REPORTS [1995] SUPP. 5 S.C.R.

A           individual case, far exceeds the maximum value, in terms of money,
            of the services that could at all be possible, then, qua, that con-
            tributor, the correlation breaks down is a subtle and attractive
            argument. However, on a proper compensation of the true concept
            of a fee the argument seems to us to be more subtle then accurate.
            The test of the correlation is not in the context of individual
B           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. If 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, though a wholly arbitrary distribution
c           of the burden might violate other constitutional limitation."

    In this connection it will also be appropriate to have a look at the obser-
    vations made in para 79 (at page 723) of the said report which are as
    follows:
D
            "The problem is, indeed, a complex one not free from its own
            peculiar difficulties. Though other legislative measures dealing
            with economic regulation are not outside Article 14, it is well
            recognised that the State enjoys the widest latitude where measures
            of economic regulation are concerned. These measures for fiscal _
E
            and economic regulation involve an evaluation of diverse and quite
            often conflicting economic criteria and adjustment and balancing
            of various conflicting social and economic values and interests. It
            is for the State to decide what economic and social policy it should
            pursue and what discriminations advance those social and
F           economic policies. In view of the inherent complexity of these fiscal
            adjustments Courts give a larger discretion to the legislature in the
            matter of its preferences of economic and social policies and
            effectuate the chosen system in all possible and reasonable ways.
            If two or more methods of adjustments of an economic measure
G           are available, the legislative preferences in favour of one of them
            cannot be questioned on the ground of lack of legislative wisdom
            or that the method adopted is not the best or that there were better
            ways of adjusting the competing interests and claims. The legisla-
            ture possesses the greatest freedom in such areas. The analogy of
H            principles of the burden of tax may not also be inapposite in
    SECRY. TO GOVT. OF MADRAS v. P.R. SRIRAMULU [FAIZAN UDDIN, J.)      565

        dealing with the validity of the distribution of the burden of a 'fee' A
        as well."

       13. Now adverting to the facts of the present case it may be stated
that the High Court after comparing the scale of Court Fees and noticing
the difference in the incidence of Court Fees between 1922 Act and 1955 B
Act recorded the findings that the levy at 7 1/2 per cent under Article 1 of
Schedule 1 of the Madras Act of 1955 on an ad-valorem flat rate basis
without any limit does not satisfy the pre-requisites of a valid levy of Court
Fees as according to the High Court it has in itself more the element of
tax rather than the idea of quid pro quo. In other words there is no
correlation between the levy ot the Court Fees and the services rendered C
to the litigants in administration of civil justice. The High Court also took
the view that the levy at the aforesaid rate imposing on a particular section
of litigants is grossly dis-proportionate part of the burden and, therefore,
deserves to be struck down being unreasonable and arbitrary. Further, the
High Court, after considering the affidavit filed by Mr. Kelu Eradi on D
behalf of the Government and also the statements appended to the
supplemental counter affidavit for the years 1955 to 1965 found that except
for the year 1954-55 the State was making yearly profit varying between 9
to 21 lacs. With regard to the year 1954-55 the High Court found that the
total actual receipts for 1954-55 were Rs. 122.12 lacs as against the expen-
diture of Rs. 124.94 lacs for the said period. According to the High Court E
the aforementioned figures of expenditure included Rs. 36.70 lacs relating
to the criminal Courts. Rs. 3.57 lacs to Presidency Magistrate Courts. Rs.
6.26 lacs to Law Officers to the Government and Rs. 58.31 lacs pertaining
to the Civil & Sessions Courts and took the view that the expenditure
incurred by the Government in payment to their Law Officers cannot be F
debited to the cost of administration of justice which the litigant can be
required to compensate for. The High Court also took the view that the
criminal Courts do not render any service to the litigants and the expendi-
ture in the administration of criminal justice is not debitable to the cost of
administration of civil justice in Courts. On these reasonings the High G
Court in support of its aforementioned conclusions took the view that if
the aforementioned total sum of Rs. 46.53 lacs and part of Rs. 58.31 lacs
under the head "Civil and Sessions Courts" are deducted the total net
balance would be less than Rs. 78.41 lacs and the State thus had earned a
profit of Rs. 43.71 lacs over the expenditure of about Rs. 78.41 lacs in the
year 1954-55.                                                                  H
    566                   SUPREME COURT REPORTS (1995] SUPP. 5 S.C.R.

A          14. Having regard to the decisions and various pronouncements cited
    above it is difficult to accept the reasoning and the view taken by the High
    Court in the impugned judgment. As discussed above if the essential
    character of the levy is that some special service is intented as qui pro quo
    to the class of citizens when is intended to be benefited by the service and
    a broad and general correlation between the amount so collected and the
B
    expenses incurred in providing the services is found to exist, then such levy
    would partake the character of a "fee", irrespective of the fact that special
    services for which the amount by levy of fee is collected incidentally and
    indirectly benefit the general public also. In order to establish the correla-
    tion between the amount recovered by way of "fee" and the expenses
C   incurred in providing the service they should not be examined so minutely
    or be weighed in golden scale to discern any difference between the two.
    It is not necessary to ascertain the same with any mathematical exactitute
    for finding the correlation out the test would be satisfied if a broad and
    general correlation. is found to exist and once such a broad correlation
D   between the totality of the expenses on the services rendered as a whole,
    on the one hand and the totality of the amount so raised by way of the fee,
    on the other is established, it would be no part of the legitimate exercise
    in the examination of the constitutionality of the concept of the impost to
    embark upon its effect in the individual cases. If the aforesaid relation is
    found to exist in the levy of the fee, the levy cannot be said to be wanting
E
    in its essential character of a fee on the ground that the measure of its
    distribution on the persons or incidet1.ce is disproportionate to the actual
    services made available to them. In view of this position of law the view
    expressed by the High Court that ad-valorem levy of Court Fee in an
    individual case far exceeds the maximum value, in terms of money, qua that
F   contributor and hence the concept of correlation fails and renders the levy
    invalid and illegal cannot be accepted for the simple reason that the
    correlation is not in the context of individual contributors, the test being
    its ascertainment on a comprehensive basis keeping in view the value of
    the totality of the service, qua, the totality of receipts. According to D.C.
G   Marco, the author of the "First Principles of Public Finance" page 33, "the
    fee must be equal in the aggregate to the cost of production of the services.
    That is the aggregate amount of the fees which the State collects from
    individual customers must equal the aggregate expenses of production." \
    Thus the test of the correlation is to be reckoned at the aggregate level
H   and not at the individual level as is also the view taken in Ashwanatha
    SECRY. TO GOVT. OF MADRAS v. P.R SRIRAMULU [FAIZAN UDDIN, J.)         567

Naravana Setty's case (supra).                                                  A

       15. As pointed out earlier with reference to the decisions of this
Court the State enjoys the widest latitude where measure of economic
regulations are concerned. These measures for fiscal and economic regula-
tion involve an evaluation of diverse and quite often conflicting economic
                                                                                B
criteria, adjustment and balancing of various conflicting social and
economic value and interests. It is for the State to decide what economic
and social policy it should pursue. It is settled law that in view of the
inherent complexity of the fiscal adjustments, the Courts give a large
discretion to the legislature in the matter of its references of economic and
social policies and effectuate the chosen system in all possible and c
reasonable ways. If two or more methods of adjustment of an economic
measure are available, the legislative preference in favour of one of them
cannot be questioned on the ground of lack of legislative wisdom or that
the method adopted is not the best or there arc better ways of adjusting
the competing interests and the claims as the legislature possesses the D
greatest freedom in such areas. It is also well settled that lack of perfection
in a legislative measure does not necessarily imply its constitutionality as
no economic measure has so far been di~covered which is free from all
discriminatory impact and that in such a complex area in which no fool
proof device exists, the Court should be slow in imposing strict and
rigorous standard of scrutiny by reason of which all local fiscal schemes E
may be subjected to criticism under the Equal Protection clause. Having
regard to these settled principles the impugned Judgment of the High
Court could not be sustained.

      16. It may be noticed that the observation of the High Court that the F
State Government had earned a profit of Rs. 43.71 lacs out of the total
receipts for the year 1954-55 and that the State has made yearly profit
varying between 9 to 21 lacs during the period from 1955 to 1965, cannot
be accepted to be correct as the said observations have been made ignoring
the facts stated in the supplementory affidavit filed by Mr. J. Shiva Kumar, G
Deputy Secretary to the Government and other material on record. It may
be noted that factually it is neither possible nor practicable to give the exact
break up of figures in regard to the expenses incurred under different
heads and other departments of the Government in relation to the ad-
ministration of civil justice. Shri Shiva Kumar in his supplcmentory affidavit
has also stated in para 6 that it is difficult to estimate accurately to the last H
    568                   SUPREME COURT REPORTS (1995] SUPP. 5 S.C.R.

A rupee the expenditure incurred on a number of items relating to the
  administration of civil justice. He has, however, given various heads under
  which the levy of fees is made as also various heads of expenditure relating
  to the administration of justice of which detailed were not given by Shri
  Kelu Eradi in his affidavit which alone has been taken into account by the
  High Court while recording its conclusions which resulted into the error.
B Apart from the facts stated above it may also be taken note of that there
  could not be any scientific method by which the levy of fee may be made
  exactly corresponding to the expenditure in a particular year relating to the
  administration of civil justice. Some fluctuations ar bound to occur in
  respect of the recoveries by levy of fee and the expenditure on administra-
c tion of civil justice. In any case it is also not the requirement of law that
  the collection raised through the levy should exactly tally or correspond to
  the expenditure in the administration of civil justice. It has already been
  ruled by this Court that the co-relation between the amount raised through
  the fee and the expenses incurred in providing the services should not be
D examined with exactitude with a view to ascertain any accurate and arith-
  metical equivalence but the test would be satisfied if a broad and general
  correlation is found to exist. That being so, even if it is accepted that the
  recoveries during the period from 1955-65 were in excess to the tune of
  about Rs. 9 to 21 lacs per year, the levy would not fail on that account
  because once it is established that the primary and essential purpose is the
E rendering of specific services to a specified class, it becomes immaterial
  that the State has earned certain benefits out of it indirectly.

         17. The High Court also took the view that the criminal Courts do
  not render any service to the litigants and, therefore, the expenditure made
F in administration of criminal justice cannot be debited to the cost of
  administration of civil justice in Courts. While so observing the High Court
  lost sight of the fact that a Munsif who deals with the civil administration
  of Justice is also invested with the magisterial powers and deals '!Vith
  criminal matters also. So is the case with the members of the higher judicial
  service. In such circumstances it is difficult to find any proper basis or
G formula to separate the charges of civil and criminal administration of
  justice when civil and criminal Courts are generally not distinct but both
  functions are discharged by the same Judicial Officer. It appears to be not
  only difficult rather impossible to ascertain as to how much public time was
  spent by a Judicial Officer while dealing with criminal matters and how
H much _time was spent while dealing with civil matters so as to come to a
    SECRY. TO GOVf. OF MADRAS v. P.R. SRIRAMULU [FAIZAN UDDIN, J. J      569

definite conclusion that aJJy surplus much less sizeable surplus is left out A
of the receipts derived from Court Fees after meeting the actual expendi-
ture in administration of civil justice. It is for these reasons that the Deputy
Secretary, Shiva Kumar in his affidavit also stated that it is difficult to
estimate accurately to the last rupee the expenditure incurred on a number
of items mentioned by him in his affidavit. It is expressed by this Court
                                                                                 B
also, "that it is difficult to estimate accurately the expenditure actually made
by the Courts in administration of civil justice but it does not mean that
there does not exist a broad correlation between the expenses and the
amount raised by way of levy."

       18. While considering the reasonableness of the levy the High Court C
also took into account the vast difference in the areas of fee between the
years 1922 to 1955. In this Connection it may be pointed out that having
regard to the changing social and economic conditions of the country and
the threats of frequent inflationary trends hovering around, the levy of
Court fees cannot remain static and has to be amended according to the
requirements of the times. The increase in the Court Fees has to be D
appreciated having regard to the increased need of the revenue by reason
of the increased cost of the administration of justice. That being so, it
would be a futile exercise to compare the rates of Court fee under the
Court fee Act. 1922 with those of 1955. There is bound to be a world of
difference in the rates due to large span of time having elapsed between E
1922 and 1955.

       19. The High Court also took the view that the expenditure incurred
by the Government in payment to their Law Officers cannot be debited to
the cost of administration of justice which the litigant can be required to
compensate for. In our opinion this view of the High Court also can not         F
be accepted for the simple reason that these Law Officers are also part of
the machinery of the administration of justice. Apart from what has been
stated above in the aforegoing paragraphs it may be noticed that the view
expressed by the High Court cannot be sustained in view of the subsequent
judgment of this Court in the case of All India Judges Association v. Union    G
of India, [1992} l SCC 119 whereby this Court had given various directions
to the Government involving considerable amount of funds most of which
will fall under the head of administration of civil justice. The Government
is, therefore, bound to raise funds through the medium of fee.

      20. Learned counsel for the respondents, howeyer, submitted that         H
    570                    SUPREME COURT REPORTS (1995] SUPP. 5 S.C.R.

A this Court in the case of Ashwanatha Narayana Setty (supra) ultimately did
    not approve the scheme of ad-valorem levy of Court Fees without upper
    limit and urged that the said decision cannot be taken as an aid in support
    of the contention of the appellant that the ad-valorem levy of Court Fee
    without upper limit is justified and legal. It is true that in the last sentence
    of para 88 in the said report this Court observed as under :
B
             "though the scheme cannot be upheld, at the same time, it cannot
             be struck down either."

    While laying emphasis on the aforesaid observation, learned counsel for
    the respondents ignored the view expressed in paras just preceding the said
c   observation, wherein it has been emphatically stated that it is difficult to
    say that the ad-valorem principle which may not be an ideal basis for
    distribution of a fee can be said to be so irrational so as to incur any
    unconstitutional infirmity. From the entire discussion of the said decision
    it is clear that this Court did not strike down the ad-valorem levy of Court
D   Fees without upper limit and at the same time has expressed displeasure
    with regard to the scheme and it is for this reason that certain suggestions
    were made in para 95 of the said report in regard to the rationalisation of
    the Court Fees under the "Rajasthan Act and the Karnataka Act" where
    the rate of Court Fees was 10 per cent ad-valorem which is not the case
E   here before us.

          21. It may be appropriate here to mention that ultimately the State
    of Madras amended its Court Fees rules with effect from 11.9.1968 whereby
    the uniform levy of 7 1/2 per cent ad-valorem Court Fees has been given
    up and the slab system with a tapering scale has been adopted. This fact
F   is clear from the affidavit dated 1.11.1973 filed before the High Court by
    one S.P. Ambrose, Special Secretary to the Government of Tamilnadu,
    Home Department.

        22. Before parting with these matters, we may point out that it could
  not be disputed that the administration of justice is a service which the
G State is under an obligation to render to its subject. There can be no two
  opinions that the amount raised from the suitors by way of fee should not
  normally exceed the cost of the administration of justice because, possibly
  there .could be no justification with the State to enrich itself from High
  Court fees or to secure revenue for gf'.neral administration. The total
H receipts from the Court fees should be such as by and large can cover the
        SECRY. TO GOVf. OFMADRASv. P.R.SRIRAMULU (FAIZANUDDIN,J.) 571

    cost of administration of justice. There should also be some measure of A
    uniformity in the scales of Court fees throughout the country as there
    appears to be a vast difference in the scales of Court fees in various States
    of the country. The feasibility of a fixed maximum chargeable fee also
    deserves serious consideration.

         23. In the facts and circumstances discussed above the impugned          B
    judgment of the High Court can not be sustained and has to be set aside.

          24. In the result the appeal succeeds and is hereby allowed. The
    impugned judgment of the High Court is set aside. The writ petition No.
    1390/1987 is dismissed. The parties are left to bear their respective costs
    in both the matters.                                                          c
    R.A.                               Appeal allowed and Petition dismissed.




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