Judgment :- 1. The question arising for consideration in all these Original Petitions is the validity of a levy called Administrative Surcharge made by the Kerala State Government. By virtue of the delegation of powers under S.5 of the Essential Commodities Act, 1955, to the State Government by the Central Government, the State Government in exercise of the power under S.3 of that Act to control production, supply and distribution of essential commodities, passed on 1st July, 1966, the Kerala Tapioca (Manufacture and Export Control) Order, 1966. Clause.5 of that Order prohibited export of tapioca except under a permit. The petitioners in all these Original Petitions are permit holders for export of tapioca. Even before passing the Order dated 1st July. 1966, the Government had by an executive order dated 15th April, 1966, directed levy of Administrative Surcharge for the export of tapioca and its products and fixed certain rates for raw tapioca, tuber chips and starch. Those rates were later on varied. The validity of the levy is sought to be sustained by the State as revenue received incidentally in the exercise of police power or in the alternative as licence fee or as fee for services rendered. 2. There are several decisions of the Supreme Court and this Court bearing on similar levies. The validity of certain annual contributions made by religious institutions to the Government under the Madras Hindu Religious and Charitable Endowments Act, 1951, came up for consideration before the Supreme Court in Commr., FIRE. v. LT. Swamiar AIR. 1964 S.C. 282. Relying on Lutz on Public Finance, Find lay Shirras on Science of Public Finance and Seligman's Essays on Taxation, the distinguishing features of taxes and fees were laid down there. Special assessments, fees and taxes were only different forms of mainfestation of the State's taxing power. Compulsion was common to all of them. While tax was levied as a part of the common burden, fee was for payment of special benefits or privileges. Fee was a kind of return or consideration for services rendered. While taxes collected merged in public revenue and went to the benefit of the general public, fees were set apart and appropriated specifically for the performance of services rendered. There should be correlation between fees levied and expenses incurred for the services rendered. Fee was a kind of return or consideration for services rendered. While taxes collected merged in public revenue and went to the benefit of the general public, fees were set apart and appropriated specifically for the performance of services rendered. There should be correlation between fees levied and expenses incurred for the services rendered. On the face of the legislative provision for the levy of fees there should be correlation mentioned between the fees levied and expenses incurred by the Government in rendering the services and there should be setting apart of fees for rendering services. Art.110(2) of the Constitution indicated two kinds of levies as fees. The first was fees for licences and the second fees for services rendered. Dealing with the first class of cases namely fees for licenses, hereinafter referred to as licence fees, the Supreme Court observed: "In the first class of cases Government simply grants a permission or privilege to a person to do something which otherwise that person would not be competent to do and extracts fees either heavy or moderate from that person is return for the privilege that is conferred." In the Madras Hindu Religious and Charitable Endowments Act, 1951, all collections made by the Government went to the Consolidated Fund of the State and there was no correlation between the collections made and the services rendered. In such circumstances, it was held that it was tax and not fee and as tax, as it was beyond the power of the State Legislature to enact the provision, it was struck down. 3. The Act was thereafter amended. As per the amended provisions, religious institutions were directed to pay annually to the Commissioner such contribution not exceeding 5 per cent of its annual income as may be prescribed for services rendered by the Government and its officers and a separate fund called Madras Religious and Charitable Endowments Administration Fund was created. That Fund was directed to vest in the Commissioner. Amounts rised were specifically ear-marked for defraying expenses for rendering services. The validity of the amended provisions in the Act again came up for consideration before the Supreme Court in S. T. Swamiar v. Commr., H. R. & C.E. (AIR. 1963 S.C. 966). It was held there that those provisions were intra vires. 4. Amounts rised were specifically ear-marked for defraying expenses for rendering services. The validity of the amended provisions in the Act again came up for consideration before the Supreme Court in S. T. Swamiar v. Commr., H. R. & C.E. (AIR. 1963 S.C. 966). It was held there that those provisions were intra vires. 4. The validity of the provision in S.49 of the Orissa Hindu Religious Endowments Act, 1939, as amended in 1952 imposing a liability on every Mutt or temple to make a specified contribution for services rendered by the State Government arose for consideration in Sri. Jagannath v. State of Orissa (AIR. 1954 S. C. 400). The collections there did not megre in the general revenue and were not allowed to be appropriated in the manner laid down for expenses of public purposes. By S.50 of the Act a separate fund was contemplated and that was set apart for rendering services. The Supreme Court held that S.49 of the Act was valid and that the levy was justified. 5. Under S.58 of the Bombay Trusts Act, 1950, contributions had to be made by public and religious trusts and they were to go to a separate fund called Public Trusts Administration Fund. That fund was created for the better administration of the trusts. It was to meet the expenses of the administration that the levy was made. It was held by the Supreme Court in Ratilal v. The State of Bombay (AIR. 1954 SC. 388) that it was fee and that S.58 of the Act which provided for the levy was valid. 6. Under the Orissa Mining Areas Development Fund Act, 1952, a cess was levied on lessees for the development of certain mining areas. As the levy was for meeting expenses connected with the rendering of services, its validity was upheld by the Supreme Court in Hingir-Rampur Coal Co. v. State of Orissa (AIR. 1961 SC. 459) as a fee. 7. S.443 of the Calcutta Municipal Act, 1951, provided that no person should without a licence granted by the Corporation keep open any cinema house for public amusement. S.548(2) of the Act said that for every licence a fee should be levied at such rate as may be fixed from time to time. In 1948 the Corporation fixed the scale of licence fees on the basis of the annual valuation of cinema houses. S.548(2) of the Act said that for every licence a fee should be levied at such rate as may be fixed from time to time. In 1948 the Corporation fixed the scale of licence fees on the basis of the annual valuation of cinema houses. Later on it changed the basis of assessment of the licence fee. Under the new method the fee was to be assessed at rates prescribed per show according to the seating capacity of the cinema house. When the validity of it was challenged, the character of licence fee had to be considered. The Supreme Court by majority judgment held in Corpn, of Calcutta v. Liberty Cinema (AIR. 1965 S.C.1107) that it was licence fee and that that was a tax and not a fee. 8. Purporting to act under S.289 (2) List I-H of the U. P. Municipalities Act, 1916, the Municipal Board of Varanasi framed bye-laws for plying rikshaws and they provided that the owner of a rikshaw bad to pay an annual licence fee of Rs. 30 and the driver of a rikshaw an annual licence fee of Rs. 5. The validity of the levy was challenged by certain rikshaw owners and rikshaw drivers. The Allahabad High Court by majority judgment held the levy to be ultra vires. It was however made clear that it was open to the Municipal Board to reduce the fee to a reasonable figure and correlate it to the services rendered by the Municipal Board. Appeal filed from that judgment to the Supreme Court was dismissed. The Supreme Court held in that case, Nagar Mahapalika, Varanasi v. Durga Das (AIR. 1965 S. C. 1119), that there was no sufficient quid pro quo for the levy and that it was illegal. In dealing with the police and taxing powers of the State it was observed there that broadly the distinction between the two was that while taxing power was exercised for the purpose of revenue and was subject to certain designated constitutional limitations police power was not subject to any such constitutional restrictions and that it was exercised for promotion of public welfare by means of regulation of dangerous or potentially dangerous businesses, occupations or activities. The following passage from American Jurisprudence, Second Edition, Vol. The following passage from American Jurisprudence, Second Edition, Vol. 16, Page 519, was quoted with approval there: "It may consequently be said that if the primary purpose of a statute or ordinance exacting an imposition of some kind is to raise revenue, it represents an exercise of the taxing power, while if the primary purpose of such an enactment is the regulation of some particular occupation, calling or activity, it is as exercise of the police power even if it incidentally produces revenue". 9. The Madras District Municipalities Act provided for levy of fees for constructing halting places and cart stands. Acting under that provision the Cannanore Municipal Council levied fee at the rate of 50 Ps. per bus per day for use of a bus stand. Later on the Municipality raised the fee to Re. 1/- per bus. As regards the increased levy it was contended by the bus operators affected by it that the income from it was considerably higher than the expenses incurred for the service and that there was no reasonable correlation between the levy and expenses incurred. It had come out that the collections on account of the increased levy amounted to Rs. 2,500/- per month while the monthly expenses incurred by the Municipality for the maintenance of the bus stand and incidental matters were about Rs. 381/-, that in the Municipal accounts the income,from the bus stand was shown as "remunerative enterprise" and that the surplus income was being spent for maintaining all the roads in the town. The Supreme Court in Municipal Council, Cannanore v. Raman Nambiyar (1969 KLT. 49) held that that increased levy did not satisfy the test of fee and upheld the decision of this Court quashing the increased levy. 10. In D. C. & G. Mills Co. v. Chief Commr., Delhi (AIR. 1971 SC 344) the validity of a levy called licence fee under the Delhi Factory Rules came up for consideration. It was found that 60 per cent of the amount of fees collected was actually spent on services rendered to the persons from whom the same was collected. Finding that there was sufficient quid pro quo the levy was upheld by the Supreme Court as fee. It was found that 60 per cent of the amount of fees collected was actually spent on services rendered to the persons from whom the same was collected. Finding that there was sufficient quid pro quo the levy was upheld by the Supreme Court as fee. It was observed there that in each case the entire scheme of the statutory provisions would have to be examined for the purpose of determining the rendering of the services which would make the levy a fee. 11. A rule framed under the Bihar and Orissa Excise Act, 1950, provided for licence fee for possession of denatured spirit. When the validity of that levy came up for consideration in I.M. & M Industries v. State of Bihar (AIR. 1971 SC. 1182) it was not disputed by any of the parties before the Supreme Court that it was a fee. It then became necessary to consider the question whether there was sufficient quid pro quo for the levy. The Supreme Court said that the correlation between the services rendered and fee levied was essentially one of fact, that the State ought to be in possession of the materials from which the correlation between the levy and services rendered could be established and that the correlation expected was only of a general character and not of arithmetical exactitude. 12. For machinery used in a tea factory in a Panchayat, licence fee was levied under the Kerala Panchayats' Act. When the validity of it arose for consideration in Travancore Tea Estates Company Ltd. v. The Executive Officer (1967 KLT. 514) a learned Single Judge of this Court held that it was a fee and that, as there was no special benefit conferred by the levy on the persons on whom it was imposed, it was invalid and could not be sustained. There are observations in that decision to show that apart from the two categories tax and fee there could not be a third category of levy called licence fee without any return or quid pro quo. 13. The validity of certain levies called licence fees had to be considered by this Court again incorporation of Calicut v. Sadasivan (1968 KLT. 589), Commr., Municipal Council v. S. M. Prabhu (1968 KLT. 628), Travancore Tea Estates Co-, Ltd.v. Executive Officer (1968 KLT. 776), Arya Vaidya Pharmacy Ltd. v. Health Officer, Ernakulam (1968 KLT. 13. The validity of certain levies called licence fees had to be considered by this Court again incorporation of Calicut v. Sadasivan (1968 KLT. 589), Commr., Municipal Council v. S. M. Prabhu (1968 KLT. 628), Travancore Tea Estates Co-, Ltd.v. Executive Officer (1968 KLT. 776), Arya Vaidya Pharmacy Ltd. v. Health Officer, Ernakulam (1968 KLT. 789), Sankaran Nair v. Vaniamkulam Panchayat (1971 KLT. 264) and Kannan Devan Hills v. Munnar Panchayat, (1971 KLT. 348), all Full Bench decisions. In all those decisions the levies were held invalid. This Court observed that there was no intermediate category of levy as licence fee which did not fall within the category of either tax or fee. 14. In the exercise of police power of the State incidentally the State may receive, revenue. A good example of that is licence fee collected for sale of liquor under the Abkari Act. In Coover jee v. Excise Commr., Ajmer (AIR. 1954 SC. 220) the Supreme Court held that for mitigation or suppression of evil the police power of the State could be used for regulating business and that one of the purposes of regulation could be raising revenue also. That decision was followed by this Court in Damodaran v. State of Kerala (1969 KLT. 587) and P. Ramachaudrai v. State of Kerala (1971 KLT. 408). This Court held that licence fee for sale of liquor could be justified as revenue collected incidentally in exercise of the police power of the State. 15. Those are the relevant decisions. The statement of law therein can now be appreciated in the light of certain clear principles which have by now received general acceptance. Taxation and Police are two of the recognised powers of all Governments. In advanced communities taxation is the principal source of revenue for Governments. Along with raising revenue it may produce some effects also on the community. In the hands of Government it is often times an engine of national policy and social reform. Although the director apparent object of a tax may be to raise revenue, it may also be to discourage use of things having disadvantageous personal or social effects or to encourage particular trades or to remedy social inequality. 16. With the individualistic philosophy gradually giving way to the political collectivistic philosophy, the regulatory activities of Governments get more and more broadened. 16. With the individualistic philosophy gradually giving way to the political collectivistic philosophy, the regulatory activities of Governments get more and more broadened. There is then an ever increasing scope for exercise of police power and in the exercise of that power Governments may come by funds. That is revenue received in the incidental exercise of police power. That may or may not be considerable. Before exercise of police power Governments may anticipate receipt of revenue in the exercise of the power and one of the purposes of exercise of the power itself may be for raising that revenue too. 17. Just as the ulterior object of a taxation may be to encourage certain trades or to equalise wealth, one of the objects of exercise of police power may be to raise revenue. From the mere fact that the ulterior object is to encourage a particular trade or to equalise wealth a measure of taxation cannot lose its character as such. Similarly from the mere fact that one of the purposes of an act in exercise of police power is to raise revenue or that the revenue raised by it is considerable, it cannot cease to be an act in exercise of the police power. 18. Tax and fee are distinct forms of the taxing power of a State. Tax levied is part of a common burden and it goes to the general revenue of the State. The benefits of it are to go to the entire community. Fee is consideration for a special benefit or privilege. In the case of fee there is direct relationship between the payment made and the service rendered as on a contractual basis as though between individuals. While taxes are levied for the very existence of Government, fees are levied only for the purpose of rendering services. The fees levied should not be disproportionate to the services rendered. It is not necessary that the services are rendered to the particular individuals from whom the fees are collected. It is sufficient if the services are rendered to the class of persons en whom the levy is made. 19. The name given to a levy may be misleading. What is called a tax may really be a fee or vice versa. Similarly what is called a licence fee may really be a fee for services rendered. It is sufficient if the services are rendered to the class of persons en whom the levy is made. 19. The name given to a levy may be misleading. What is called a tax may really be a fee or vice versa. Similarly what is called a licence fee may really be a fee for services rendered. One has to go to the pith and substance of the matter to find out its real character. It may be necessary to enquire as to what is the primary object of the levy and the essential purpose it is intended to achieve to find out its character. In many of the reported cases the levy named as licence fees on scrutiny was found to be merely fees and as fees they were found invalid as there was no sufficient quid pro quo. The question as to whether a levy is fee or tax is one purely of fact. 20. There are several ways by which a levy can be proved to be fee for rendering services. Examination of the scheme of the statutory provisions under which the levy is made would be useful to ascertain its character. The correlation between the levy and the expenses to be incurred can be proved by showing that on the face of the legislative provision itself the collections are not to be merged in the general revenue but are to be set apart and appropriated for rendering services. It can also be proved by the authority making the levy furnishing materials in its possession which show the connection between the levy and the services rendered. It is not necessary that the correlation should be proved with arithmetical exactitude. It is sufficient if it is proved that a substantial portion of the fund collected has been used for rendering services. 21. A licence fee may be levied under the taxing or police power. Licence fee levied under the Abkari Act is an instance of levy made in exercise of the police power. Except in D. C. & G. Mills Co. v. Chief Commr., Delhi (AIR. 1971 SC. 344) and I. M. & M. Industries v. State of Bihar (AIR. 1971 SC. A licence fee may be levied under the taxing or police power. Licence fee levied under the Abkari Act is an instance of levy made in exercise of the police power. Except in D. C. & G. Mills Co. v. Chief Commr., Delhi (AIR. 1971 SC. 344) and I. M. & M. Industries v. State of Bihar (AIR. 1971 SC. 1182) in all the other decisions cited above where the validity of the levy or licence fee under the taxing power was considered the levies were made by local authorities like Municipalities or Panchayats which had no police power. It was not therefore considered in those cases whether licence fee could not validly be levied in exercise of the police power of Governments. No doubt it was not levies made by local authorities which arose for consideration in D. C. & G. Mills Co. v Chief Commr., Delhi (AIR. 1971 SC. 344) and I. M & M. Industries v. State of Bihar (AIR. 1971 SC. 1182). But in the former case it was found that what was described as licence fee was really only fee and in the latter the finding of the High Court that licence fee in that case was really fee was not challenged before the Supreme Court by any of the parties. There is absolutely nothing in any of the decisions to show that as regards levies made by Governments licence fee cannot be levied in exercise of the police power or that even in exercise of the taxing power it cannot be levied as special assessment, a distinct category specifically recognised by Seligman in his Essays on Taxation and accepted in Commr. H. R. E. v. L. T. Swamiar (AIR 1954 SC. 282.) It is possible to think of routine assessment on warehouses and prohibition of use of bonded warehouses except under licences followed by special assessment on bonded warehouses demanded and paid as licence fees. 22. It is true that while there are specific entries in the Legislative Lists in the Seventh Schedule of the Constitution with regard to various forms of taxes and there is also an entry at the end of each List providing for levy of fees there is no levy called licence fee contemplated by any of those entries. 22. It is true that while there are specific entries in the Legislative Lists in the Seventh Schedule of the Constitution with regard to various forms of taxes and there is also an entry at the end of each List providing for levy of fees there is no levy called licence fee contemplated by any of those entries. But to conclude from it that all levies should be either taxes or fees is not warranted because of the express provisions in Art.110 and 199 of the Constitution which deal with Money Bills of the Union and States. The relevant portions of Art.110 can now be read: "110. (1) For the purposes of this Chapter, a Bill shall be deemed to be a Money Bill if it contains only provisions dealing with all or any of the following matters, namely: (a) the imposition, abolition, remission, alteration or regulation of any tax; (g) any matter incidental to any of the matters specified in sub-clauses (a) to (f). (2) A Bill shall not be deemed to be a Money Bill by reason only that it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licences or fees for services rendered, or by reason that it provides for the imposition, abolition, remission, alteration or regulation of any tax by any local authority or body for local purposes. The wording of the corresponding provisions in Art.199 is similar. The above provisions show that licence fee is a category by itself and that it is different from fee for services rendered contemplated by Art.110 (2) and 199 (2) and taxes contemplated by Art.110 (1)(a)and 199 (1)(a) and it is in respect of it that the Supreme Court has said in Commr. H. R. E. v. L. T Swamiar (AIR. 1954 SC. 282) that it may be moderate or heavy and that it is for permission or privilege to do something which a person would not be competent to do otherwise. 23. Now to the instant cases. The orders containing the impugned levy in these cases were passed on the basis of S.3 (2) (ii) of the Essential Commodities Act. 1954 SC. 282) that it may be moderate or heavy and that it is for permission or privilege to do something which a person would not be competent to do otherwise. 23. Now to the instant cases. The orders containing the impugned levy in these cases were passed on the basis of S.3 (2) (ii) of the Essential Commodities Act. By virtue of the powers conferred under S.5 of that Act the Central Government had directed that the powers conferred on it by S.3 (1) to make orders shall in relation to food stuffs be exercisable also by the State Government. It was by virtue of such authorisation that orders were passed by the State Government levying Administrative Surcharge on permit holders for export of tapioca. S.3 (2) (ii) of the Act specifically authorised the Government to charge fees for the grant or issue of licences, permits or other documents. Administrative Surcharge levied under those powers is therefore solely fee. It is not licence fee. It is also not revenue received incidentally while exercising police power. 24. There is nothing on the face of the Government Order to show that there is any correlation between the levy and the expenses to be incurred for rendering services. Government must be in possession of materials from which at least in a general way correction between the levy and the services rendered can be established. It has not chosen to place those materials before court. Of course there is a statement in the counter affidavit that the total amount collected by the State from 1954 was Rs. 20.52 lakhs and that it was not even 1 per cent of the additional expenditure which the Government had to incur in this regard. The expenses mentioned there as having been incurred must have been for regulating production and manufacture of all essential commodities covered by the Act and not for issue of licences to tapioca exporters because the expenses for issue of licences to exporters of tapioca could not be so heavy. There is no material furnished to show what exactly was the service that the Government lendered to exporters of tapioca and what exactly was the amount that the Government had to spend on that account. It is specifically stated in the Government Order dated 15th April, 1966, that the amount collected by the levy should be made and credited to Government. It is specifically stated in the Government Order dated 15th April, 1966, that the amount collected by the levy should be made and credited to Government. It is to the general revenue or the Consolidated Fund of the State that it goes. The levy cannot be sustained as fee. 25. Viewed from another angle also the impugned levy is invalid. Trade and commerce within any part of India or between States shall be free under Art.301 of the Constitution. But both Parliament and Legislatures of States can by law in the public interest impose under Art.302 and 304 restrictions on them. And if a State wishes to impose reasonable restrictions on such freedom of trade and commerce previous sanction of the President has to be obtained for introducing or moving the Bill for imposing such reasonable restrictions. The orders by which Administrative Surcharge is levied are not Slaws of the State Legislature enacted with the previous sanction of the President. 26. In O. P. 4329 of 1969 although the petitioner stated that the details of the amount paid as administrative surcharge would be given by him later he has not so far done so. In O. P. Nos. 240, 241 and 433 of 1970 the petitioners have expressly stated that they would claim refund in separate proceedings. In O. P. 4982 of 1970 the petitioners do not allege that they have paid any amount as administrative surcharge. They have only challenged the validity of the levy. In the remaining Original Petitions refunds have been claimed by the petitioners. Details of the amount claimed are as given below: 27. The fact that they are the amounts paid by the petitioners in those Original Petitions towards this levy is not disputed in the Counter affidavit filed on behalf of the State. The petitioners are entitled to refund of those amounts. 28. In the result these Original Petitions are allowed by quashing the orders of the Government levying administrative surcharge for export of tapioca and its products and allowing the petitioners in OP. Nos. 5103 and 5105 of 1968, 3834,4261,4369,4396,4518,4580,4618,4657, 4769, 4829, 4837, 4870, 4948,' 5019 and 5056 of 1969, 534, 536, 866, 869, 1559, 5050 and 5220 of 1970 refund of the amounts claimed by them in those petitions. There will be no order as to costs in these Original Petitions. Nos. 5103 and 5105 of 1968, 3834,4261,4369,4396,4518,4580,4618,4657, 4769, 4829, 4837, 4870, 4948,' 5019 and 5056 of 1969, 534, 536, 866, 869, 1559, 5050 and 5220 of 1970 refund of the amounts claimed by them in those petitions. There will be no order as to costs in these Original Petitions. Raghavan C. J. I wish to add a few lines on one or two small matters. In Para.21 of the judgment my learned brother has prepared on behalf of both of us, he has observed probably casually that local authorities like municipalities or Panchayats have no police Power. I am not sure. If a local authority, for instance, a municipality or a Panchayat, imposes and collects a licence fee to regulate a dangerous trade or business with a view to control it, it cannot be said that such regulation or control is not under the Police Power. Again, in Para.22 of the judgment, my learned brother has held that licence fee is a category by itself and it is different from fee for services rendered and taxes; and that this difference is brought out by Art.110 and 199 of the Constitution. In support of this, my learned brother has relied on the decision of the Supreme Court in The Commissioner, H. R. E..Madras v. L T. Swamiar (AIR. 1954 SC. 282). The relevant passage from this decision appears extracted in Para.2 of the judgment, which states that a licence fee is a fee in return for a privilege conferred on the person who pays it, who has no right otherwise for it. This may itself indicate that there is an element of quid pro quo or return for the licence fee. The Full Bench decisions of this Court (about half-a-dozen of them) and the decision of the Single Judge mentioned in Para.12 of the judgment have all stated that there was no intermediate category of levy as licence fee which did not fall within either the category of tax or of fee. The Full Bench decisions of this Court (about half-a-dozen of them) and the decision of the Single Judge mentioned in Para.12 of the judgment have all stated that there was no intermediate category of levy as licence fee which did not fall within either the category of tax or of fee. I am not bold enough to say that the passage extracted from the decision of the Supreme Court in L. T. Swamiar's case has an effect different from these decisions: in my opinion, the passage extracted itself indicates that there are only two classes of levy, one, a tax with no quid pro quo or consideration to the payer of the levy, and two, a fee where there is a quid pro quo or consideration to the payer by services rendered or at least by the conferment of a privilege as in the case of a licence fee. In other words, if a licence fee confers a privilege on the payer which he otherwise does not have, the licence fee is a fee: if there is no such privilege and the licence and the licence fee are merely for the purpose of control in the common interest, then the licence fee is a tax notwithstanding its name as a fee. With the aforesaid clarifications, I agree with the judgment of my learned brother.