DELHI CLOTH & GENERAL MILLS CO. LTD. versus CHIEF COMMISSIONER, DELHI & ORS.

Citation: [1970] 2 S.C.R. 348 · Decided: 11-09-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed
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Judgment (excerpt)

348 
DELHI CLOTH & GENERAL MILLS CO. LTD. 
v. 
CHIEF COMMISSIONER, DELHI & ORS. 
September 11, 1969 
[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] 
B 
The Factories Act, 1948 (63 of 1948) Delhi Factories Rules 1950 
made under s. 112 of Act-Validity of R. 7 read with R. 5 and Schedule 
cheret.>-Fee for annual renewal of licence to run factory-Whether fee 
or tax~-Maintenance of Inspectors whether provid.es quid pro quo for fee. 
The appellant company had a number of industrial establishments 
in Delhi. 
These establishments were factories within the meaning of s. 
2(m) of the Factories Act, 1948. The factories could be run only after 
re.gistration and under a licence granted under the Act and the Rules on 
prj'ment of a prescribed fee. 
The licence was renewable every year 
under R. 7 on payment of the sam"!'. fee as for grant of the licence. The 
company filed a writ petition under Arts. 226 and 227 of the Constitution 
challenging the validity of the Rules under which the fee for renewal 
of the licence for each of .its factories in Delhi was being levied and 
collected i.e. R. 7 read witlr R. 5 and its Schedule. 
The petition being 
dismissed by the High Court, an appeal was filed in this Cqurt with 
certificate. 
The contentioit on behalf of the appellant was that there 
was nC\ quid pro quo fot·i'the fee paid for renewal' of the licence and 
that the maintenance ofO::.ii. team of Inspectors under the Act did not 
amount to such quid pro:n_uo. Reliance was placed on the Liberty Cine111a 
case. 
· 
HELD : In each c~se when the question arises whether the levy is 
in the nature of a fee, the entire scheme of the statutory provisions, the 
duties and obligations imposed on the inspecting staff Rnd the nature 
of the work done by them will have to be examined for the purpose 
of determining the rehdering of the services which would make the levy 
of a fee. · In the Liblrily Cinema case it was found that no service of any 
kind was being and could be rendered and for that reason the levy was 
held to be a tax and not a fee. 
The present case however fell within 
the other class of cases in which contributions for the purpose of main-
taining an authority and the staff for supervising ano controlling public 
institutions were held to he fee and not tax. [354 B-C] 
A large number of provisions of the Act, particularly in the chapters 
dealing with safety, involve a ·good deal of technical knowledge and in 
the course of discharge of their duties and obligations the Inspectors arc 
expected to give proper a<lvice and · 2uidance so 
that there may be 
due compliance 'Vith the provisions of the Act. 
On certain occasions 
the factoory owners are bound to receive a good deal of benefit by being 
saved from the consequences of the working of dangerous machines or 
employment of such processes as involve danger to human life by being 
warned at the proper time as to the defective nature of the machinery 
or of the taking of precautions which are enjoined under the Act. Simi-
larly if a building or a machinery or plant is in such a condition that it 
is dangerous to human life or safety the Inspector by serving a timely 
notice on the manager saves the factory owner from all. the consequences 
of proper repairs not being done in time to the building or machinery. 
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DELHI CLOTH MILLS v. CHIEF COMMR. (Grover, J.) 
349 
The Hig;1 Court found that 60% of the amount of licence fees which 
were being realized was actually spent on services rendered to the factory 
owners. 
The findin~ being 
one of fact 
must 
be 
considered 
final. 
[355 H-356 DJ 
It could therefore hardly be contended that the levy of the licence 
fee was wholly unrelated to the expenditure incurred out of Lhe total 
realizaiion. The appeal must accordin~ly fail. [356 D-E] 
Corporotion of Calcutta & Anr. v. Lihert,v Cinema, [1965] 2 S.C.R. 
477, distinguished. 
· 
H. H. Sudhundra Thirtht.· Swarniar v. Comniissioner for Hindu Relf. 
giou.< & Charitable Endowments, My30re0 [1963) Supp. 2 S.C.R. 302, 
Mahant Sri Jagannath Ramanu; Das & Anr, v. State of Orlssa & Anr. 
[1954] S.C.R. 1046 and Ratila/ Panachand Gandhi v. State of Bombay & 
Ors., [1954] S.C.R. 1055, applied. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1414 of 
1966. 
. 
Appeal from the order dated February 11, 1965 of the Punjab 
High Court, Circuit Bench at Delhi in Civil Writ No. 3-D of 19~3. 
H. R. Gokhale, D. R. Thadani and A. N. Goyal, for the· 
appellant.
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