{"id":120967,"date":"1992-04-23T00:00:00","date_gmt":"1992-04-22T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/commissioner-and-secretary-to-vs-sree-murugan-financing-on-23-april-1992"},"modified":"2016-08-23T13:38:59","modified_gmt":"2016-08-23T08:08:59","slug":"commissioner-and-secretary-to-vs-sree-murugan-financing-on-23-april-1992","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/commissioner-and-secretary-to-vs-sree-murugan-financing-on-23-april-1992","title":{"rendered":"Commissioner And Secretary To … vs Sree Murugan Financing … on 23 April, 1992"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Commissioner And Secretary To … vs Sree Murugan Financing … on 23 April, 1992<\/div>\n
Equivalent citations: 1992 AIR 1383, \t\t 1992 SCR (2) 735<\/div>\n
Author: M Fathima Beevi<\/div>\n
Bench: Fathima Beevi, M. (J)<\/div>\n
           PETITIONER:\nCOMMISSIONER AND SECRETARY TO GOVERNMENTCOMMERCIAL TAXES AND\n\n\tVs.\n\nRESPONDENT:\nSREE MURUGAN FINANCING CORPORATION  COIMBATOREAND ORS.\n\nDATE OF JUDGMENT23\/04\/1992\n\nBENCH:\nFATHIMA BEEVI, M. (J)\nBENCH:\nFATHIMA BEEVI, M. (J)\nKULDIP SINGH (J)\n\nCITATION:\n 1992 AIR 1383\t\t  1992 SCR  (2) 735\n 1992 SCC  (3) 488\t  JT 1992 (3)\t591\n 1992 SCALE  (1)900\n\n\nACT:\n\t  Tamil\t   Nadu\t   Chit\t  Fund\t Rules,\t   1964\t   :\nRule 42-Appendix II-Articles 1 and 8-A.\n\t : Chit Fund--Enhancement of fees for registration\nof  bye-laws--Levy of fees for filing audited and  certified\nBalance\t sheets--Validity  of--Held levy of  fees  has\tlive\nnexus with expenditure incurred for benefit of \"chit fund\"--\nLevy held valid.\n     'Tax' and 'fee'--Distinction between--What is.\n\n\n\nHEADNOTE:\n     Under the Tamil Nadu Chit Funds Act, 1961 no person can\nstart  or  conduct  any chit unless he\tregisters  with\t the\nRegistrar the proposed bye-laws of the chit. An\t application\nfor  registration of bye-laws is to be accompanied  by\tfees\nset  out in Appendix II of the Tamil Nadu Chit\tFund  Rules,\n1967.  Article\t1 of Appendix II was amended  and  the\tfees\npayable\t for  registration  of\tbye-laws  of  the  chit\t was\nenhanced.  Simultaneously Article 8-A was inserted by  which\nfees  for filing audited and certified balance sheet by\t the\nchartered Accountants was levied.\n     The   respondents\tchallenged  the\t validity   of\t the\namendments  on\tthe ground that the rates of fees  fixed  in\nArticle\t 1  and\t Article 8-A  were  disproportionately\thigh\nhaving\tno nexus to the nature of service rendered  and\t the\nlevy was in fact not a fee but a tax.\n     The  High\tCourt of Madras struck down  the  amendments\nholding\t that (i) the necessary element of quit pro quo\t was\nabsent;\t  (ii)\tthe  number  of\t the  subscribers   or\t the\ninstallments to the chit has no nexus with the\tregistration\nfee,  and  (iii) that since no scrutiny\t or  examination  of\nbalance\t sheets\t was  required to be done  under  the  Rules\ntherefore no expenditure\n\t\t\t\t\t\t   736\nneed  be  incurred and as such no fees could be\t levied\t for\nthat purpose. Against the decision of the High Court appeals\nwere filed in this Court.\n     Allowing the appeals and setting aside the judgment  of\nthe High Court, this Court,\n     HELD : 1. The enhanced fee is justified on the legal as\nwell  as the factual anvil of quid pro quo. Apart  from\t the\nappointment  of\t Registrar,  its  staff\t and  various  other\nfunctionaries,\tthe  scheme  of the  Act  in  its  operation\ninvolves  huge expenditure which is entirely met out of\t the\nFee-fund. The fees collected under the Act have,  therefore,\nlive nexus with the expenditure incurred for the benefit  of\nthe \"chit fund\" business. [746 G-H, 747 A]\n     2. The scheme of the Act and the Rules shows that there\nis  effective supervision and control at every stage of\t the\nfunctioning  of\t the \"chit fund\" business.  The\t High  Court\ngrossly erred in holding that the number of the\t subscribers\nor  the instalments has no nexus with the registration\tfee.\nEvery  subscriber  has to enter into an agreement  with\t the\nForeman who conducts the business on behalf of the  proprie-\ntors.  The object of the Act and Rules obviously is to\tpro-\ntect  the interest of the subscribers. More the\t subscribers\nmore burden on the authorities and as a consequence more fee\nis required to meet the expenditure. [745 G-H, 746 A]\n     It is no doubt correct that after registration of\tbye-\nlaws  fees are payable under Section 53 of the Act  for\t the\nperformance of various other functions by the Registrar\t and\nhis  staff, but that is justified in view of the  scheme  of\nthe  Act. The expectation of winning a draw or a bid at\t the\nauction and becoming rich over-night lures the\tlower-middle\nclass  and  the poor to subscribe to the chit  fund  out  of\ntheir  savings\tor  even  by  borrowing\t money.\t In  such  a\nsituation apart from regulatory measures it is necessary  to\nhave  strict  control and supervision over the\t\"chit  fund\"\nbusiness.  The\tAct and the Rules are  operating  with\tthat\nobjective. [746 A-C]\n     3. It cannot be said that it was not required under the\nRules  to  scrutinise and investigate the  contents  of\t the\nbalance\t sheets submitted through the chartered\t accountants\nand as such it was not necessary to do so and that since  no\nscrutiny or examination of balance-sheets was required to be\ndone, no expenditure need be incurred and as such no fee for\nthat  purpose  could be levied. The registrar  is  justified\nrather\tduty-bound to act in furtherance of the\t objects  of\nthe Act and the Rules. Even otherwise when\n\t\t\t\t\t\t  737\nthe  Rules  provide  for filing\t of  balance-sheets  by\t the\nChartered Accountants, it is necessary in the context of the\nrules and the Act to provide machinery to examine and verify\nthe  contents of the balance-sheets. No fault can  be  found\nwith the reasons given by the State for bringing in  Article\n8-A  in Appendix II to the Rules. The High Court  fell\tinto\nerror in quashing the impugned amendments. [747 F-H, 748  A,\n746 H]\n     Kewal  Krishan  Puri v. State of Punjab,<\/a> [1979]  3\t SCR\n1217; Sreenivasa General Traders and Ors. v. State of Andhra\nPradesh\t and Ors.,<\/a> [1983] 4 SCC 353; Commissioner  of  Hindu\nReligious  Endowments, Madras v. Shri  Lakshmindra  Thirthya\nSwamiyar,<\/a>  [1954] SCR 1005; H.H Sudhandara  v.\tCommissioner\nfor Hindu Religious and Charitable Endowments, [1963] Suppl.\n2  SCR 302; Hingir Rampur Coal Co Ltd. and Anr. v. State  of\nOrissa\t and  Anr.,<\/a>  [1961]  2\tSCR  537;   H.H.Swamiji\t  v.\nCommissioner,  Hindu  Religious\t and  Charitable  Endowments\nDepartment   and   Anr.,<\/a>   [1980]  1   SCR   368;   Southern\nPharmaceuticals chemicals Trichur and Ors. etc. v. State  of\nKerala and Ors, etc., [1982] 1 SCR 519, referred to.\n     Municipal Corporation of Delhi and anr. v. Mohd. Yaseen\netc., [1983] 2 SCR 999, relied on.\n\n\n\nJUDGMENT:\n<\/pre>\n
     CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 582 to
\n625 of 1988.\n<\/p>\n
     From  the\tJudgment and Order dated  20.3.1985  of\t the
\nMadras High Court in W.P. Nos. 9471, 9472, 9615, 9616, 9668,
\n9669,  9670, 9671, 9809, 10067, 10082, 10083, 10297,  10391,
\n10397, 10400, 10430, 10461, 10547, of 1982, W-P Nos. 73, 74,
\n75,  655,  1509, 1510, 1511, 1714, 1802, 1939,\t1970,  1971,
\n2504,  2519,  2520, 3446, 3447, 3448, 3449, 3752,  3764\t and
\n7767 of 1983 and W.P.Nos. 573, 1426, 6093, of 1984.\n<\/p>\n
     V.\t  Krishnamurthy\t  and  V.R.  Karthikeyan   for\t the
\nAppellants.\n<\/p>\n
     K.V. Mohan, Smitha Singh and Chari for the Respondents.
\n     The Judgment of the Court was delivered by
\n     FATHIMA BEEVI, J. These appeals arise out of the common
\njudgment  of  the  Madras  High Court in  a  batch  of\twrit
\npetitions  in which the respondents challenged the  validity
\nof  the\t amendments effected to Article 1 and  insertion  of
\nArticle 8-A to Appendix II of the Tamil Nadu Chit Fund
\n\t\t\t\t\t\t 738<\/span>
\nRules,\t1964 (for short ‘the Rules’). The High Court in\t its
\njudgment  dated\t 20.3.1985 has struck down  as\tinvalid\t the
\nimpugned amendments.\n<\/p>\n
     The Tamil Nadu Chit Funds Act, 1961 (The Act)  provides
\nfor the regulation of chit funds in the State of Tamil Nadu.
\n‘chit’ is a transaction by which its foreman enters into  an
\nagreement  with\t a number of subscribers that every  one  of
\nthem shall subscribe certain sum by installments for a defi-
\nnite  period and that each subscriber in his turn as  deter-
\nmined  by  lot or by auction, shall be entitled to  a  prize
\namount. The sum total of the subscription payable by all the
\nsubscribers for any installment of a chit without any deduc-
\ntion for discount or otherwise is chit amount.\n<\/p>\n
     It is useful to summarise the scheme of the Act and the
\nrules.\tThe  Registrar\tof chit funds is  appointed  by\t the
\nGovernment under section 51. No person can start or  conduct
\nany chit unless he registers with the Registrar the proposed
\nbye-laws of the chit. Section 7 provides that the Registrar,
\non  being satisfied that the bye-laws have been\t registered,
\nthe chit agreement has been filed, and the security required
\nunder  section 12 has been furnished by the foreman,  grants
\n“certificate of commencement”. The auction or drawing of any
\nchit  commences\t only  on obtaining  such  certificate.\t The
\nsecurity furnished under section 12 can only he released  by
\nRegistrar in accordance with the prescribed procedure.\n<\/p>\n
     Under section 16 every foreman has to prepare and\tfile
\nwith  the  registrar  a\t duly  audited\tbalance-sheet.\t The
\ndefaulting non-prized subscriber is liable to be removed and
\nthe aggrieved person has a right of appeal to the  Registrar
\nwhose  order  in the matter is final.  Any  substitution  in
\nplace of a defaulting subscriber has to be recorded and copy
\nfiled  with the Registrar. The rights of the prized or\tnon-
\nprized\tsubscribers  in the chit cannot\t be  transferred  or
\ninterfered with without the previous sanction in writing  of
\nthe  Registrar. The foreman is required to maintain all\t the
\nrecords\t pertaining  to a chit for a specified\tperiod.\t The
\nRegistrar is empowered under section 37 to inspect the\tchit
\nbooks and all records after giving due notice. If the Regis-
\ntrar is of the opinion that the accounts of any chit are not
\nproperly maintained and that such account should be audited,
\nit shall be lawful for him under section 51(4) to have\tsuch
\naccount\t audited by a chit auditor. The foreman has a  right
\nof  appeal  against the order of the Registrar\trefusing  to
\nregister bye-laws or to grant a certificate of\tcommencement
\nor refuse to accept the security or refusing to release the
\n\t\t\t\t\t\t     739<\/span>
\nproperty  charged  by  way of  security\t as  provided  under
\nsection 54. Penalty for the contravention of the  provisions
\nis provided under section 56.\n<\/p>\n
     The  provisions  of  the  Act  impose  duties  on\t the
\nRegistrar  and are intended to regulate the conduct  of\t the
\nbusiness.  The registrar has to take adequate  security\t and
\nkeep the same intact until the claims of all subscribers are
\nsatisfied  and till the termination of the chit, the  Regis-
\ntrar is required to discharge several duties.\n<\/p>\n
     Section  63 empowers the Government to make  rules\t for
\ncarrying out all or any of the purposes of the Act.  Section
\n53 which provides for levy of fees reads:-
\n\t “53. (1) There shall be paid to the Registrar\tsuch
\n\t fees  as  the\tGovernment may from  time  to  time,
\n\t prescribe for-\n<\/p>\n
\t      (a) the registration of the bye-laws of a chit
\n\t under section 3;\n<\/p>\n
\t      (b) the grant of a certificate of commencement
\n\t under section 7;\n<\/p>\n
\t      (c)  filing  with the Registrar  of  the\tchit
\n\t agreement and copies of documents under section 11,
\n\t 20, 21, 29 and 32;\n<\/p>\n
\t      (d) the inspection of documents under  section
\n\t 52;\n<\/p>\n
\t      (e)  the\tcertificate, copy of or\t extract  of
\n\t documents under section 52;\n<\/p>\n
\t      (f)  the audit of accounts of the foreman\t and
\n\t the issue of an audit certificate;\n<\/p>\n
\t      (g) such other matters as may appear necessary
\n\t to give effect to the purposes of this Act.\n<\/p>\n
\t      (2) A table of fees payable under\t sub-section
\n\t (1)  shall  be\t published in the  Fort\t St.  George
\n\t Gazette.” (Now the Tamil Nadu Government Gazette).
\n     The  Rules\t have been framed under section 63.  Rule  3
\nstates\tthat  the  bye-laws shall provide  for\tthe  matters
\nspecified thereunder. If the Registrar refuses to the regis-
\nter the bye-laws of a chit, he shall record his reasons
\n\t\t\t\t\t\t    740<\/span>
\nfor  such refusal in writing and communicate a copy  of\t the
\norder  to the applicant. Rule 11 prescribes the\t particulars
\nto  be contained in the chit agreement, rule  14  prescribes
\nthe  form  of minute of the proceedings and rules 15  to  22
\nregulate the acceptance and release of security. In the case
\nof  cash  deposited in an approved bank and  transferred  in
\nfavour\tof  Registrar,\tintimation has to be  given  by\t the
\nRegistrar  to the bank. Under rule 22 the  Registrar  before
\nreleasing the security may call upon the foreman to  produce
\nregister and books of accounts maintained and issue a notice
\nto  the\t subscribers. Registrar has to hear  objections,  if
\nany,  and inquire into the same and record the\tdecision  in
\nwriting.  On the application of the foreman,  the  Registrar
\nshall cause the balance-sheet and profit and loss account to
\nbe audited by the chit auditor as expeditiously as possible.
\nRule  42 states that the fees payable to the  Registrar\t for
\nthe  matters specified under section 53 shall be as set\t out
\nin  Appendix II and shall be paid in cash. Appendix II\tcon-
\ntains the table of fees for the registration of bye-laws  of
\nchit  under  section  3 as Article 1 and for  the  audit  of
\naccounts under sub-section (4) of section 51 as Article 8.\n<\/p>\n
     The impugned amendments are to the following effect:-
\n\t\t\t AMENDMENT
\n\t  In the said Rules, in Appendix II, in the Table of
\n\t  fees\t(1) for Article I and the  entries  relating
\n\t  thereto,  the following Article and entries  shall
\n\t  be substituted, namely:-\n<\/p>\n
\t  1.  For  the Registration of bye-laws\t of  a\tchit
\n\t  under section 3.\n<\/p>\n
\t\t\t\t       Rates of Fees.\n<\/p>\n
(a)for chits for a term of   Re.1 per subscriber or install-
\nless than one year Rs. 1      ment  which ever is  higher\n<\/p>\n
(b) for chits for a term of   subject to a minimum of Rs.50
\n    one year and above\t      per subscriber or instalment
\n    Re.2.50\t\t      whichever is higher subject to
\n\t\t\t      a minimum of Rs.50\n<\/p>\n
(i) chit amount of value up  per subscriber or\tinstalemnt
\n    to Rs.5,000\t   Rs.5\t     which ever is higher subject to a
\n\t\t\t     minimum of Rs. 50
\n\t\t\t\t\t\t       741<\/span>\n<\/p>\n
(ii) for chit amount of\t Per subscriber or instalment which-\n<\/p>\n
     value between Rs.\t ever is higher subject to a minimum
\n     5,001 and Rs.10,000 Rs.50
\n     Rs.5<\/p>\n
(iii)for chit amount of\t Per subscriber or instalment which-\n<\/p><\/blockquote>\n
     value between Rs.\t ever is higher subject to a minimum
\n     10,000 and Rs20,000 of Rs.50
\n     Rs.5\n<\/p><\/blockquote>\n
(iv) for chit amount of\t Per subscriber or instalment which-<\/p><\/blockquote>\n
     value between Rs.\t ever is higher subject to a minimum
\n     20,000 and Rs30,000 of Rs.50
\n     Rs.10\n<\/p><\/blockquote>\n
(v)  for chit amount of\t Per subscriber or instalment which-\n<\/p><\/blockquote>\n
     value between Rs.\t ever is higher subject to a minimum
\n     30,001 and Rs40,000 of Rs.50
\n     Rs.12\n<\/p><\/blockquote>\n
(vi) for chit amount of\t Per subscriber or instalment which-<\/p><\/blockquote>\n
     value between Rs.\t ever is higher subject to a minimum
\n     40,001 and Rs50,000 of RS.50
\n     Rs.15\n<\/p><\/blockquote>\n
(vii)for chit amount of\t Per subscriber or instalment which-\n<\/p><\/blockquote>\n
     value exceeding Rs. ever is higher subject to a minimum
\n     50,000\tRs.20\t of Rs.50
\n     (2)…….<\/p><\/blockquote>\n
     (3)  after\t Article  8, as so  amended,  the  following
\nArticle and entries shall be inserted, namely:-\n<\/p><\/blockquote>\n
     “8A. For filing Balance-sheets audited and certified by
\n     Charted Accountant.\n<\/p><\/blockquote>\n
     (a) When the chit amount does not exceed Rs.500-Rs.10.00\n<\/p><\/blockquote>\n
     (b)  When the chit amount exceeds Rs.500 for the  first
\n     Rs.500 as under sub-clause (a) and for every Rs.500  or
\n     part thereof in excess of Rs.500 subject to the maximum
\n     of Rs.250. The fee leviable under this clause shall not
\n     exceed  Rs.250″.<\/p><\/blockquote>\n<\/blockquote>\n
     The  challenge was mainly on the ground that the  rates
\nof fees fixed in article 1 and Article 8-A in Appendix II to
\nthe  Rules were disproportionately high having no  nexus  to
\nthe nature of services rendered and
\n\t\t\t\t\t\t       742<\/span>
\nintended to augment revenue and partake character of tax and
\nas  such the levy suffered from the vice  of  arbitrariness,
\nhostile\t discrimination\t and  unreasonable  restriction\t  on
\ntrade.\tThe  High  Court came to  the  conclusion  that\t the
\nnecessary  element  of quid pro quo was absent and  as\tsuch
\nstruck down the amendment on the said ground.<\/p><\/blockquote>\n
     The  High\tCourt declared the amendment  by  which\t the
\nregistration  fee  was\tenhanced, as  ultra  vires,  on\t the
\nfollowing reasoning:-\n<\/p>\n
\t “When\ta Foreman starts a chit, under section 3  he
\n\t has  to apply for registration of the bye-laws.  It
\n\t is only there after, he can approach the subscriber
\n\t and  get  the chit agreements as  prescribed  under
\n\t Section  5 executed and file them under Section  6.
\n\t He cannot commence the business till he secures the
\n\t certificate under section 7(2). Therefore, when  an
\n\t application  is made for registration of  bye-laws,
\n\t at  that stage, section 3(3) authorises the  Regis-
\n\t trar to find out as to whether the bye-laws are  in
\n\t accord with the provisions of the Act or the  rules
\n\t made  thereunder.  As to what the  bye-laws  should
\n\t provide, Rule 3 enumerates them. An application for
\n\t registration  is to be in Form No.1 accompanied  by
\n\t fees  set out in Appendix II. Hence, the number  of
\n\t the  subscribers or the instalments, has  no  nexus
\n\t with  what  are required to be done  under  section
\n\t 3(3)  by  the Registrar. Whether they are  more  or
\n\t less, it was only a question of furnishing particu-
\n\t lars  and  recording them and no more. If  for\t the
\n\t entire\t period of the chit except the\tregistration
\n\t fee  no other fee is demanded and the entire  serv-
\n\t ices rendered is covered by this demand alone, then
\n\t the correlation claimed could be available. Section
\n\t 53 enables imposition of fees in respect of  almost
\n\t each one of the subsequent stages of the conduct of
\n\t the  chit  whenever the authorities are to  be\t ap-
\n\t proached  or they are to exercise their powers.  In
\n\t the context of such provisions having been made  in
\n\t the  Act, the registration fees claimed has  to  be
\n\t restricted  to what are required to be\t done  under
\n\t section 3(3).”\n<\/p>\n
     The  High Court held Article 8-A to be invalid  on\t the
\nfollowing reasoning:-\n<\/p>\n
\t\t\t\t\t\t       743<\/span><\/p>\n
\t “When\trules themselves do not contemplate  produc-
\n\t tion  of  registers, books of\taccounts  and  other
\n\t records, the claim made that pursuant to the filing
\n\t of  the balance-sheet, records have to be  verified
\n\t and that the whole matter has got to be  thoroughly
\n\t examined is unacceptable. In such of those  matters
\n\t where irregularities are noticed, the Registrar can
\n\t call  for all the records and scrutinise  them\t and
\n\t thereafter initiate prosecution or take such  other
\n\t action. Such instances would arise in both  catego-
\n\t ries. Hence, when the rules themselves\t contemplate
\n\t a  different  type  services to  be  rendered\twhen
\n\t Chartered Accountant’s Certificates are filed,\t the
\n\t fee impossable under Article 8-A cannot be the same
\n\t as in Article 8 which contemplates more  comprehen-
\n\t sive services to be rendered. Therefore as  rightly
\n\t pleaded  by the petitioners, the necessary  element
\n\t of  quid  pro quo is not existing  and\t furthermore
\n\t this  is  an unreasonable restriction on  right  of
\n\t trade\tand  the rate fixed is aimed  at  increasing
\n\t general revenues.”\n<\/p>\n
     The  High Court relied upon the judgment of this  Court
\nin Kewal Krishan Puri v. State of Punjab,<\/a> [1979] 3 SCR\t1217
\nwherein\t it was observed that a substantial portion  of\t the
\namount\tcollected  on account of fees, must  be\t shown\twith
\nreasonable  certainty as being spent for rendering  services
\nto  justify  the  quid pro quo\twhich  is  a  distinguishing
\nfeature of “fee” from “tax”.\n<\/p>\n
     This  Court in sreenivasa General Traders &  others  v.
\nState of Andhra Pradesh & others [1983] 4 SCC 353 considered
\nKewal Krishan Puri’s case and observed as under:-\n<\/p>\n
\t  “The decision in Kewal Krishan Puri case does\t not
\n\t lay down any legal principle of general applicabil-
\n\t ity. The observation made therein seeking to  quan-
\n\t tify  the extent of correlation between the  amount
\n\t of  fee  collected and the cost   of  rendition  of
\n\t service,  namely, “At least a good and\t substantial
\n\t portion of the amount collected on account of fees,
\n\t may be in the neighbourhood of two-thirds or three-
\n\t fourths, must be shown with reasonable certainty as
\n\t being spent for rendering services in the market to
\n\t the payer of fee”, appears to be an obiter. It\t was
\n\t not intended to lay down a rule of universal appli-
\n\t cation but it
\n\t\t\t\t\t\t744<\/span>
\n\t was  a decision which must be confined to the\tspe-
\n\t cial facts of that case.”\n<\/p>\n
     This  Court  in several judgments over a period  of  40
\nyears has authoritatively crystalised the  contradistinction
\nbetween\t “tax”\tand “fee”. The judgments of  this  Court  in
\nCommissioner  of Hindu Religious Endowments, Madras v.\tShri
\nLakshmindra  Thirthya Swaminyar,<\/a> [1954] SCR 1005; H.H.\tsud-
\nhandara\t v. Commissioner for Hindu Religious and  Charitable
\nEndowments, [1963] Suppl. 2 SCR 302; Hingir Rampur Coal\t Co.
\nLtd.  & another v. State of Orissa & another, [1961]  2\t SCR
\n537;  H.H.  Swamiji  v. Commissioner,  Hindu  Religious\t and
\nCharitable Endowment Department &<\/a> another, [1980] 1 SCR\t 368
\nand southern Pharmaceuticals and Chemicals Trichur &  Others
\netc. v. State of Kerala and Others etc., [1982] SCR 519 were
\nconsidered  by this Court in Municipal Corporation of  Delhi
\nand  another v. Mohd. Yaseen etc., [1983] 2 SCR\t 999  wherin
\nthe  Court  speaking  through Chinnappa\t Reddy,\t J  held  as
\nunder:-\n<\/p>\n
     ”\t What  do we learn from these precedents?  We  learn
\n\t that  there is no generic difference between a\t tax
\n\t and  a\t fee, though broadly a tax is  a  compulsory
\n\t exaction as part of a common burden, without  prom-
\n\t ise of any special advantages to classes of taxpay-
\n\t ers  whereas a fee is a payment for  services\tren-
\n\t dered,\t benefit  provided or  privilege  conferred.
\n\t Compulsion  is not the hallmark of the\t distinction
\n\t between  a tax and a fee. That the money  collected
\n\t does not go into a separate fund but goes into\t the
\n\t consolidated fund does not also necessarily make  a
\n\t levy a tax. Though a fee must have relation to\t the
\n\t services  rendered,  or the  advantages  conferred,
\n\t such  relation\t need not be direct: a\tmere  causal
\n\t relation may be enough. Further, neither the  inci-
\n\t dence\tof the fee nor the service rendered need  be
\n\t uniform. That others besides those paying the\tfees
\n\t are also benefited does not detract from the  char-
\n\t acter\tof the fee. In fact the special\t benefit  or
\n\t advantage  to\tthe payers of the fees may  even  be
\n\t secondary  as compared with the primary  motive  of
\n\t regulation in the public interest. Nor is the Court
\n\t to  assume  the role of a cost accountants.  It  is
\n\t neither  necessary  nor  expedient  to\t weight\t too
\n\t meticulously the cost of the services rendered etc.
\n\t against  the  amount  of fees collected  so  as  to
\n\t evenly balance the
\n\t\t\t\t\t\t       745<\/span>
\n\t two. A broad correlationship is all that is  neces-
\n\t sary.\tQuid Pro Quo in the strict sense is not\t the
\n\t one and only true index of a fee; nor is it  neces-
\n\t sarily absent in a tax.”\n<\/p>\n
     In\t Mohd.\tYaseen’s case the Municipal  Corporation  of
\nDelhi enhanced the slaughtering fee is respect of two  cate-
\ngories\tof animals by eight fold. Some Butchers of the\tcity
\nquestioned  the\t revision of rates on the  ground  that\t the
\nproposed  enhanced  fee was wholly disproportionate  to\t the
\ncost of services and supervision and was in fact not a\tfee,
\nbut a tax. During the pendency of the writ petitions in\t the
\nHigh Court, by virtue of an interim arrangement, the Munici-
\npal Corporation of Delhi was permitted to collect  slaughter
\nfee at double the rates (instead of 8 times) and as a result
\nthereof the Corporation realised a sum of Rs. 4,24,494.\t The
\nbudget\tof the Corporation showed a sum of Rs.\t2,56,000  as
\nthe  expenditure involved in connection with  the  slaughter
\nhouse.\tThe High Court came to the conclusion that  even  if
\nthe  original fee was doubled the amount realised  would  be
\nmore  than sufficient to meet the expenditure involved\tand,
\ntherefore,  there  was no reason at all for  increasing\t fee
\neight fold and so the proposed fee was not fee but a tax for
\nwhich  there is no legislative mandate. This  Court  allowed
\nthe  appeal and set aside the judgment of the  High   Court.
\nThis  Court  clarified the concept of “fee”  which  we\thave
\nquoted above. We respectfully agree with the same.\n<\/p>\n
     The  Act and the Rules provide complete  mechanism\t for
\nthe  control, supervision and regulation of the “chit  fund”
\nbusiness in the State of Tamil Nadu. No person can start  or
\nconduct any “chit” unless he registers the proposed bye-laws
\nin  accordance with the procedure prescribed. It  is  common
\nknowledge that there are large number of subscribers to the
\n“chit  fund”  business.\t The Act  and  the  Rules  primarily
\nprotect\t the  subscribers  and\tin  the\t process  help\t the
\nproprietors  to\t run  the  “chit  fund”\t business  to  their
\nadvantage. There are elaborate provisions under the Act\t and
\nthe  Rules providing investigation into the  functioning  of
\nthe  said business. The scheme of the Act and the  Rules  as
\ndetailed  in  the earlier part of the  judgment\t shows\tthat
\nthere is effective supervision and control at every stage of
\nthe functioning of the “chit fund” business. The High  Court
\ngrossly erred in holding that the number of the\t subscribers
\nor  the instalments has no nexus with the registration\tfee.
\nEvery  subscriber  has to enter into an agreement  with\t the
\nForeman who conducts the business on behalf of the
\n\t\t\t\t\t\t       746<\/span>
\nproprietors.  The  object of the Act\/Rules obviously  is  to
\nprotect the interest of the subscribers. More the  subscrib-
\ners  more burden on the authorities under the Act\/Rules\t and
\nas  a consequence more fee is required to meet the  expendi-
\nture. It is no doubt correct that after registration of bye-
\nlaws  fees are payable under Section 53 of Act for the\tper-
\nformance of various other functions by the Registrar and his
\nstaff,\tbut that is justified in view of the scheme  of\t the
\nAct.  The  expectation\tof winning a draw or a\tbid  at\t the
\nauction and becoming rich over-night lures the\tlower-middle
\nclass  and  the poor to subscribe to the chit  fund  out  of
\ntheir  savings or even by borrowing money. In such a  situa-
\ntion apart from regulatory measures it is necessary to\thave
\nstrict\tcontrol and supervision over the “chit\tfund”  busi-
\nness.  The Act and the Rules are operating with that  objec-
\ntive.  The counter affidavit filed by the State\t before\t the
\nHigh Court justified the enhancement of the registration fee
\ninter alia on the following grounds:-\n<\/p>\n
\t “…..Considering  that  in  respect  of  chits  of
\n\t longer\t duration and larger number of\tinstalments,
\n\t greater  amount  of service had to be\trendered  in
\n\t that, more minutes etc., were filed, it is  equita-
\n\t ble  and fair to fix the fees for  registration  of
\n\t bye-laws  with regard to number of  instalments  of
\n\t duration  of  chits. The fees were  revised  taking
\n\t these\tfacts into consideration. It has also to  be
\n\t verified  whether  the\t foreman  has  taken  proper
\n\t security  for future payment of  subscription\tfrom
\n\t the prized subscriber, whether proper receipts were
\n\t obtained for the payment of prize monies and on due
\n\t dates,\t if  not whether the prize amount  has\tbeen
\n\t deposited  in\ta  Bank as required by\tthe  Act  by
\n\t verifying  receipts  of deposit etc.  The  extracts
\n\t filed\tin  respect  of\t removal,  substitution\t and
\n\t assignment  etc.  have also to be verified  and  in
\n\t respect  of higher chit amounts in long term  chits
\n\t for longer duration these transactions will be more
\n\t and they impose greater responsibility on the\tChit
\n\t Registrar.  The  work connected with  watching\t the
\n\t filing\t of various documents by the Foreman on\t the
\n\t due dates and in proper form also takes  considera-
\n\t ble time…..”\n<\/p>\n
     We are of the view that the High Court fell into  error
\nin  quashing the impugned Amendments. The enhanced  fee,  in
\nthis case, is justified on the legal as well as the  factual
\nanvil of quid pro quo. Apart from the
\n\t\t\t\t\t\t       747<\/span>
\nappointment  of Registar, its staff and various other  func-
\ntionaries,  the scheme of the Act in its operation  involves
\nhuge expenditure which is entirely met out of the Fee-Fund .
\nThe fees collected under the Act have therefore, live  nexus
\nwith  the expenditure incurred for the benefit of the  “chit
\nfund”business.\n<\/p>\n
     To\t justify  Article  8-A prescribing  fee\t for  filing
\nbalance sheets by the chartered accountants it was stated as
\nunder:\n<\/p>\n
\t “……I submit that pursuant to the filing of\t the
\n\t balance-sheet\trecords\t have to  be  verified.\t The
\n\t balance-sheet has also got to be examined in detail
\n\t to  find out whether it is in conformity with\t the
\n\t objects  of the chit and also whether\tthe  figures
\n\t tally\twith regard to the collections and  payments
\n\t of  Prize amount and whether the Prize amount\talso
\n\t correctly  reflects  the  scope of  each  chit\t and
\n\t whether  the  commission of the  foreman  has\tbeen
\n\t correctly  worked out. In short, the  whole  matter
\n\t has  got to be thoroughly examined to\tsee  whether
\n\t that Particular years’ transactions fully  reflects
\n\t the scope of each chit and whether the\t collections
\n\t and disbursements including the commission retained
\n\t by  the  foreman have all been done  in  conformity
\n\t with  the  Act and the Rules,since it is  the\tsub-
\n\t scriber’s  interest  which is paramount.  I  submit
\n\t that all these involve the services of the staff of
\n\t the office of the Registar”.\n<\/p>\n
     The High Court was wholly unjustified in rejecting\t the
\nabove  quoted reasoning for levying fee under  Article\t8-A.
\nThe  High Court reached the conclusion that it was  not\t re-
\nquired\tunder  the rules to scrutinise and  investigate\t the
\ncontents  of the balance sheets submitted through the  char-
\ntered accountants and as such it was not necessary to do so.
\nThe  High  Court  further found that since  no\tscrutiny  or
\nexamination  of balance-sheets was required to be  done,  no
\nexpenditure  need  be incurred and as such no  fee  for\t the
\npurpose could be levied. We do not agree with the High Court
\nreasoning.  The Registrar is justified rather duty-bound  to
\nact in furtherance of the objects of the Act and the  Rules.
\nEven  otherwise\t when the Rules provide for filling  of\t the
\nbalance sheets by the Chartered Accountants, it is necessary
\nin the context of the rules and the Act to provide machinery
\nto examine and verify the contents of the balance-sheets. No
\nfault  can be found with the reasons given by the State\t for
\nbringing in Article 8-A in
\n\t\t\t\t\t\t     748<\/span>
\nAppendix II to the Rules.\n<\/p>\n
     We,  therefore, allow the civil appeals and  set  aside
\nthe judgment of the Madras High Court dated March 20,1985  .
\nThe writ Petitions filed by the respondents-Petitioners\t are
\ndismissed with costs. We quantify the costs as Rs. 20,000 to
\nbe paid jointly by all the respondents-petitioners in  these
\ncases.\n<\/p>\n
T.N.A.\t\t\t\t\tAppeals allowed.\n\t\t\t\t\t\t       749<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Commissioner And Secretary To … vs Sree Murugan Financing … on 23 April, 1992 Equivalent citations: 1992 AIR 1383, 1992 SCR (2) 735 Author: M Fathima Beevi Bench: Fathima Beevi, M. (J) PETITIONER: COMMISSIONER AND SECRETARY TO GOVERNMENTCOMMERCIAL TAXES AND Vs. RESPONDENT: SREE MURUGAN FINANCING CORPORATION COIMBATOREAND ORS. DATE OF JUDGMENT23\/04\/1992 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-120967","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nCommissioner And Secretary To ... vs Sree Murugan Financing ... on 23 April, 1992 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/commissioner-and-secretary-to-vs-sree-murugan-financing-on-23-april-1992\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Commissioner And Secretary To ... vs Sree Murugan Financing ... on 23 April, 1992 - 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