Case Summary
| Citation | Corporation of Calcutta v. Liberty Cinema AIR 1965 SC 661 |
| Keywords | section 349 548 of Calcutta Municipal Act, fee, tax, services to be rendered, article 19(f)&(g) of the constitution, ut res magis valeat quam pareal, cinema house, increase in license fee |
| Facts | The appellant corporation established a fee schedule in 1948, based on an annual valuation of cinema houses, although the method used for this valuation does not appear in the records. The respondent, Liberty Cinema, obtained a license for its cinema house and paid an annual license fee of Rs. 400. In 1958, a resolution was passed that modified the license fee structure, introducing rates based on the number of shows. Since the respondent’s cinema has 551 seats, it became liable to pay Rs. 5 per show, resulting in an annual payment of Rs. 6,000. The respondent challenged this resolution by petitioning the High Court under Article 226, seeking to have it quashed. The High Court granted the appeal and annulled the levy. In response, the Corporation of Calcutta appealed to the Supreme Court. |
| Issues | Whether the levy is in return for services? |
| Contentions | The Corporation contended that the levy under Section 548(1)(b) and Schedule XII, Rule 15 of the Calcutta Municipal Act, 1951, was a tax on property (specifically, the cinema building) rather than on entertainment. They argued that using seating capacity as a basis for determining the tax rate was reasonable, reflecting the property’s earning potential and commercial value. The Corporation asserted that the State Legislature had the power to allow them to levy taxes on buildings and land. They claimed that using seating capacity for assessment was a valid exercise of that authority. The Corporation emphasized that the levy was an annual charge on the premises, regardless of the number of shows or tickets sold, distinguishing it from a tax on entertainment itself. Liberty Cinema argued that the levy amounted to expropriation and was, therefore, invalid as violation article 19(f)&(g). The rate of Rs. 6000 per year is so high. |
| Law Points | The court dismissed the respondent’s argument by stating that the new fee rate could not be considered prohibitively high for conducting their business. The increase to Rs. 5 per show for a seating capacity of 551 is not unreasonably excessive. The challenge to the levy based on the claim that it amounted to expropriation was unfounded and was rightly rejected by the High Court. The court noted that it is undisputed that a levy intended as a return for services rendered constitutes a fee, and it is not necessary to debate what qualifies as a fee or the tests used to determine it. It is secondary to establish that the statute imposing the levy must primarily aim to provide benefits from the services to those who pay and to the public at large. The term “fee” cannot be strictly defined as exclusively indicating a charge for services; it is acknowledged that some authorized levies are taxes, even if labeled as fees. The court observed that a statute should be interpreted in a manner that upholds its validity, avoiding any interpretations that could lead to its invalidation. Therefore, in section 548, the word “fee” should be interpreted as a tax, as it does not include any provision for services to be rendered. |
| Judgement | The Supreme Court allowed the appeal of the Corporation of Calcutta and upheld the validity of the levy. |
| Ratio Decidendi & Case Authority | Section 443 provides that no person shall without a license granted by the corporation keep open any cinema house for public amusement. Section 548(2) provided that for every license under the act, a fee may, unless otherwise provided, be charged at such rate as may from time to time be provided. |
Full Case Details
SARKAR J.- The appellant Corporation was constituted by the Calcutta Municipal Act, 1951, an Act passed by the Legislature of the State of West Bengal. The Act was intended to consolidate and amend the law relating to the Municipal affairs of Calcutta and it defined the duties, powers and functions of the Corporation in whose charge those affairs were placed. The respondent is a firm owning a cinema house and carrying on business of public cinema shows.
Section 443 of the Act provides that no person shall without a licence granted by the Corporation keep open any cinema house for public amusement. It, however, does not say that any fee is to be paid for the licence. But sub-s. (2) of S. 548 says that for every licence under the Act, a fee may, unless otherwise provided, be charged at such rate as may from time to time be provided. In 1948 the Corporation had fixed the scale of fees on the basis of the annual valuation of the cinema-houses made by a method which does not appear on the record. The respondent had under these sections obtained a licence for its cinema house and had been paying a licence fee calculated on the aforesaid basis. The fee as calculated was Rs. 400 per year. By a resolution passed on March 14, 1958 the Corporation changed the basis of assessment of the licence fee with effect from April 1, 1958. Under the new method the fee was to be assessed at rates prescribed per show according to the sanctioned seating capacity of the cinema houses. The respondent’s cinema house, had 551 seats and under the changed method it became liable to a 482 fee of Rs. 5 per show. In the result it became liable to pay a fee of Rs. 6,000 per year.
The respondent then moved the High Court at Calcutta under Art. 226 of the Constitution for a writ quashing the resolution. The application was first heard by Sinha J. who allowed it. This order was confirmed by an appellate Bench of the same Court consisting of Bose C. J. and C. K. Mitter J. on appeal by the Corporation. Hence the present appeal.
In this Court the levy was challenged on three grounds the first of which may be disposed of at once. That ground was that the levy amounted to expropriation and was, therefore, invalid as violating cls. (f) and (g) of sub-Art. (1) of Art. 19. Sinha J. rejected this contention as on the materials on the record it could not be said that the new rate was so high as to make it impossible for the respondent to carry on its business. The learned Judges of the appellate Bench do not appear to have taken a different view of the matter. It seems to us that a fee at the rate of Rs.5 per show in a house with a seating capacity of 551 cannot in any sense be said to be unreasonably high. With that seating capacity the respondent would at a reasonable estimate be collecting about Rs. 1,000 per show and paying the sum of Rs. 5 per show. No doubt the increase in the rate of fee from Rs. 400 to Rs. 6,000 per year was large. But at the same time the circumstances obtaining in our country had undergone an immense change between 1948 when the fee was earlier fixed and 1958. The challenge to the levy on the ground that it amounted to expropriation is wholly unfounded and was rightly rejected in the High Court.
Substantially the same argument was advanced from a different point of view. It was said that Art. 19(1), (f) and (g) were violated in any case as S. 548 gave an arbitrary power of taxation. This contention found favour with the learned Judges of the High Court but, with
respect to them, we are unable to agree. In our view, for reasons to be later stated, no arbitrary power of taxation was conferred by s. 548.
The second challenge to the levy was put in this way. The levy authorised by ss. 443 and 548 was a fee in return for services to be rendered and not a tax and it had therefore to be commensurate with the costs incurred by the Corporation in providing those services. The present levy of Rs. 6,000 per year was far in excess of those costs and was for that reason invalid. The Corporation’s answer to this contention is that the levy was a tax and not a fee taken in return for services and no question of its being proportionate to any costs for services arose. The Corporation does not dispute that if the levy was a fee in the sense mentioned, it would be invalid. The only question on this part of the case, therefore, is, was the levy a fee in return for services? Another subsidiary question is, what is the nature of the services which makes a levy in respect of them, a fee? It is not disputed that a levy made in return for services rendered would be a fee. It is, therefore, unnecessary to consider what a fee is or the tests by which it is to be determined. Nor is it necessary to discuss whether in order that a levy may be a fee the statute imposing it must intend primarily to confer the benefits of the services on those who pay it and benefits received from those services by the public at large, if any, must be secondary. A discussion of these aspects of fees, will be unprofitable and will only cloud the point really in issue.
Now, on the first question, that is, whether the levy is in return for services, it is said that it is so because s. 548 uses the word “fee”. But, surely, nothing turns on words used. The word “fee” cannot be said to have acquired a rigid technical meaning in the English language indicating only a levy in return for services. No authority for such a meaning of the word was cited. However that may be, it is conceded by the respondent that the Act uses the word “fee” indiscriminately. It is admitted that some of the levies authorised are taxes though called fees. Thus, for example, as Mitter J. pointed out, the levies authorised by ss. 218, 222 and 229 are really taxes though called fees, for no services are required to be rendered in respect of them. The Act, therefore, did not intend to use the word fee as referring only to a levy in return for services.This contention is not really open to the respondent for s.548 does not use the word “fee”; it uses the words “licence fee” and those words do not necessarily mean a fee in return for services. In fact in our Constitution fee for licence and fee for services rendered are contemplated as different kinds of levy. The former is not intended to be a fee for services rendered. This is apparent from a consideration of Art. 110(2) and Art. 199(2) where both the expressions are used indicating thereby that they are not the same. In Shannon v. Lower Mainland Dairy Products Board [(1938) A. C. 708 484] it was observed:
“(I)f licences are granted, it appears to be no objection that fees should be charged in order either to defray the costs of administering the local regulation or to increase the general funds of the Province or for both purposes It cannot, as their Lordships think, be an objection to a licence plus a fee that it is directed both to the regulation of trade and to the provision of revenue.”
It would, therefore, appear that a provision for the imposition of a licence fee does not necessarily lead to the conclusion that the fee must be only for services rendered.
It may also be stated that a statute has to be read so as to make it valid and, if possible, an interpretation leading to a contrary position should be avoided; it has to be construed ut res magis valeat quam pareat: see Broom’s Legal Maxims (10 ed.) p. 361, Craies on Statutes (6th ed.) p. 95 and Maxwell on Statutes (11th ed.) p. 221. Therefore again, the word “fee” in s. 548 should be read as meaning a tax, for as we shall show later, it made no provision for services to be rendered; any other reading would make the section invalid. A construction producing that result has to be avoided. We do not also think that by reading the word as referring to a tax we would be doing any violence to the language used.
In the result we would allow the appeal.
