Holding

The Supreme Court held that while the collection of IDC by CMDA is a procedural matter and not a prohibited delegation of power, IDC is a fee and the Board must justify the rate; in the absence of such justification, the High Court order was set aside and the matter remitted for fresh consideration.

Summary

Builders and developers applied for planning permission from the Chennai Metropolitan Development Authority (CMDA) and were required to pay Infrastructure Development Charges (IDC) of Rs.64 per square metre, which the CMDA collected on behalf of the Chennai Metropolitan Water Supply and Sewerage Board (the Sewerage Board). The appellants challenged the levy, arguing that the Sewerage Board had no power to delegate collection to the CMDA and that the charge, being a fee, required a clear quid‑pro‑quo justification which was absent. The Madras High Court upheld the levy, holding that the Board could delegate collection under the 1998 Regulations. On appeal, the Supreme Court held that the power to collect IDC is a procedural matter, not a substantive delegation, but affirmed that IDC is a fee and therefore the Board must demonstrate the basis of the rate. Since no material justification was placed before the High Court, the Court set aside the High Court order, allowed the appeals, and remitted the matter to the High Court for fresh consideration, directing the State of Tamil Nadu to file an affidavit justifying the fee.

Issues considered

The Sewerage Board’s power to delegate collection of Infrastructure Development Charges to the CMDA under the Chennai Metropolitan Water Supply and Sewerage Act, 1978.
Whether the Infrastructure Development Charges constitute a fee requiring the principle of quid pro quo, and whether the rate of Rs.64 per square metre is justified.
Whether Regulation 4 of the 1998 Regulations represents a procedural provision or a substantive delegation of power.

Legislation cited

Tamil Nadu Town and Country Planning Act, 1971s. 59, s. 60, s. 63-A, s. 9-A

Subjects

Infrastructure Development ChargesDelegation of powerFee vs taxQuid pro quoChennai Metropolitan Development AuthorityChennai Metropolitan Water Supply and Sewerage BoardAdministrative lawProcedural vs substantive provisionArticle 12 Constitution

Judgment

(2009] 2 S.C.R. 661

_.I M. CHANDRU A
v
THE MEMBER SECRETARY, CHENNAI METROPOLITAN
DEVELOPMENT AUTHORITY & ANR.
Civil Appeal No. 1079 of 2009
FEBRUARY 17, 2009 B

[ S.B. SINHA AND DR. MUKUNDAKAM SHARMA, JJ ]
" Chennai Metropolitan Water Supply and Sewerage
·infrastructure Development Charges (Levy and Collection)
Regulations, 1998 : c
Regulation 4 - Infrastructure development charges -
Levy and collection of by Sewerage Board through CMDA -
HELD: Providing for collection of JDC is matter of procedure
and not a substantive provision, and, as such not a delegation
D
of power- However, JDC being a fee, principle of quid pro quo
.J
shall apply-As no justification for levy of fee was placed before
High Court, matter remitted to it for consideration afresh - The
Chennai Metropolitan Water Supply and Sewerage Act, 1978
- ss. 6 and 81 (2) (jj) -Administrative Law- Delegation of power
- Fee - Principle of quid pro quo.
E

By virtue of s. 6(2)(xii-a), of the Chennai Metropolitan
Water Supply and Sewerage Act, 1978, the Chennai
Metropolitan Water Supply and Sewerage Board levied
infrastructure development charges at the rate of Rs.64/- F
per sq. metre on multi-storeyed buildings, and under
Regulation 4 of the Chennai Metropolitan Water Supply
and Sewerage Infrastructure Development Charges (Levy
and Collection) Regulations, 1998, authorized Chennai
Metropolitan Development Authority to collect the same. G
The appellants-builders and developers challenged the
collection of IDC in writ petitions before the High Court
" which upheld the levy and its collection observing that
CMDA had been empowered by the Sewerage Board to
661 H
.,
662 SUPREME COURT REPORTS [2009] 2 S.C.R.

A collect the said charges in terms of the Regulations and t.
the same was valid in law. Aggrieved, the builders and
l '- t-
developers filed the appeals.
Allowing the appeals and remitting the matter to the
-B High Court, the Court.
·,
HELD: 1.1 The Sewerage Board is a State within the
meaning of Article 12 of the Constitution of India. It is a
creature of statute. It can delegate its power provided there "'
exists a provision in the Act. Power to delegate, thus, being
c a statutory requirement, must find its place in the principal I-
Act itself and not in the Regulation. [para 19] [673-E]
.i
1.2 However, by virtue of Regulation 4 of the Chennai '
t
Metropolitan Water Supply and Sewerage Infrastructure
Development Charges (Levy and Collection1 Regulations,
D
1998, framed in terms of s.81 (2)(jj) of the Chennai
Metropolitan Water Supply and Sewerage Act, 1978, CMDA
has been autho'rized to collect IDC. Thus, providing for
collection of IDC is a matter of procedure and not a
substantive provision, and, as such, is not a delegation
E
of power. ·cMDA has no power to assess IDC, nor does it
have any power to utilize/ appropriate any fund collected
on behalf of the Sewerage Board. The power of collection
is merely an incidental power. [para 21] [674-D-F]

F 2.1 State or the Board did not state as to on what
basis the rate of Rs.64/- per square meter was fixed. What
was the amount to be spent towards services to be
rendered to the multi-storeyed and special buildings had ._
not been spelt out. What had merely been stated was that '
G the amount was necessary to be spent for overall
development of the water supply and sewerage system.
If IDC is a fee, the principle of quid pro quo shall apply. ..
Like a State, all other authorities who are statutorily
empowered to levy a fee, must spell out as to on what
H basis, the same is charged. The State has not placed any
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 663
MET. DEV. AUTH. & ANR.
_,. ~ material before the High Court. The High Court has als9 A
not addressed itself properly on the same issue. [para 23]
[674; 675-A-B]
Sri Krishna Das v. Town Area Committee, Chirgaon (1990)
3 SCC 645; Jindal Stainless Ltd. (2) & Anr. v. State of Haryana
& Ors. (2006) 7 SCC 241; Mumbai Agricultural Produce Market B
Committee & Anr. v. Hindustan Lever Ltd. & Ors. (2008) SCC
575; Mohan Meakin Ltd. v. State of H.P & Ors. 2009 (1) SCALE
510; A.P. Paper Mills Ltd. v. Govt. of A.P. and Another (2000) 8
SCC 167; Ashok Lanka and Another v. Rishi Dixit and Others
(2005) 5 SCC 598; Kera/a Samsthana Chethu Thozhilali c
Union v. State of Kera/a and Others (2006) 4 SCC 327; State
of Kera/a and Others v. Maharashtra Distilleries Ltd. and Others
(2005) 11 SCC 1; and Indian Mica Micanite Industries v. The
State of Bihar and Others (1971) 2 SCC 236 - referred to.
D
..j 2.2 In the instant case, no justification for levy of fee
has been placed before the High Court. The order of the
High Court is set aside. In the writ petition, State of Tamil
Nadu may be impleaded as a party. The parties shall be at
liberty to produce material before the High Court for.
justification for levy of the fee. [para 27] [679; 680-H] E

Case Law Reference
(1990) 3 sec 645 referred to para 24
c2006) 1 sec 241 referred to para 24 F
c2008) sec 575 - referred to para 24
2009 (1) SCALE 510 referred to para 24
c2000) 8 sec 167 referred to para 25
G
c2005) 5 sec ~98 referred to para 25 ·
c2006) 4 sec 327 referred to para 25
c2oos) 11 sec 1 referred to para 25
(1971) 2 sec 236 referred to para 26 H
664 SUPREME COURT REPORTS [2009] 2 S.C.R.

A CIVILAPPELLATE JURISDICTION: Civil Appeal No. 1079
of 2009
+..._ .(-·
';i

From the final Judgement and Order dated 20.12.2006 of ''
the High Court of Judicature at Madras in Writ Petition No. 34702
of 2006.
B
WITH
Civil Appeal Nos. 1080, 1081, 1083, 1082 & 1084 Of 2009 ..
L. Nageshwar Rao, Jayanth Muth Raj, Malavika G. and
c C.K. Sasi, with him for the Appellant.
V. Krishnamurthy, T. Harish Kumar, V. Vasudevan, (for R.
Nedumaran) and S. Thanajanayan, with him for the 'I
Respondents. !

D The Judgement of the Court was delivered by
S.B. SINHA, J.
1. Leave granted.
r
INTRODUCTION r-
E
2. Legality and/or validity of Infrastructure Development
Charges (IDC) by Chennai Metropolitan Development Authority
(CMDA) allegedly on behalf of Chennai Metropolitan Water
Supply and Sewerage Board (the Sewerage Board) for issuing
F planning permission in regard to the construction of multi-
storeyed building and/or special building is in question in this
appeal which arises out of a judgment and order dated
20.12.2006 passed by a Division Bench of the High Court of
Judicature at Madras in W.P. No.34702 of 2006. ~-

G BACKGROUND FACTS )I

3. Appellants herein are builders and developers and
..
individuals who had applied for grant of permission for
construction of multi-storeyed building and/or special building
H before the CMDA. They. were asked to deposit specified sums
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 665
MET. DEV. AUTH. & ANR. [ S.B. SINHA J. ]
..- I
towards IDC payable to the Sewerage Board by CMDA. A
Contending that CMDA had no power to collect IDC and the
Sewerage Board is otherwise obligated to supply water and
provide sewerage connection, they filed writ petitions before
the High Court of Madras. The said writ petitions have been
dismissed by reason of the impugned judgment. B
SUBMISSIONS
J
~

4. Mr. L. Nageshwar Rao, learned counsel appearing on
behalf of the appellants, would contend :
1) The Chennai Metropolitan Water Supply and c
Sewerage Act, 1978 (the 1978 Act) containing no
provision for delegation of power to an outsider, the
purported demand made by the CMDA must be held
to be wholly illegal;
D
~ 2) As no special services are to be rendered to the
builders and/or developers or individuals so as to
satisfy the doctrine of quid pro quo, the impugned
judgment cannot be sustained.
5. Mr. Krishnamurty, learned senior counsel appearing on E
behalf of the respondent, on the other hand, urged :
1) The Board being bound by the directions issued by
the State of Tamil Nadu, delegation to compute the
IDC and collect the same by CMDA cannot be held
to be ultra vires the power of the Sewerage Board .. F
2), CMDA being the local authority and having been in-
charge of supply of water and providing sewerage,
such delegation was made for convenience of the
applicants.
G
7' 3) As charges are being levied and collected towards
provision for or improvement of water supply or
sewerage service, the same meet the legal
requirement of quid pro quo.
H
666 SUPREME COURT REPORTS [2009] 2 S.C.R.

A STATUTORY PROVISIONS
6. The Legislature of the State of Tamil Nadu enacted the
Tamil Nadu Town and Country Planning Act, 1971 (the 1971 --
,
;
I

Act) .. Levy of development fees by CMDA is prescribed
thereunder as a pre-condition for grant of permission to construct •
8 '
building.
,Relevant provisions of the 1971 Act read as under:
"9-A. Establishment of the Chennai Metropolitan
DevelopmentAuthority.-(1) With effect from such date
c as the Government may, by notification in the Tamil Nadu
Government Gazette appoint in this behalf, there shall be I
f

established for the Chennai Metropolitan Planning area
an a~thority by the name of the Chennai Metropolitan
Development Authority.
D
:xxx :xxx xxx
9-E. Relation with the Chennai Metropolitan Water
Supply and Sewerage Board.-(1) Notwithstanding
anything contained in this Act, the Chennai Metropolitan
E Development Authority shall fully consult and collaborate
the Chennai Metropolitan Water Supply and Sewer~ge
.Board constituted under the Chennai Metropolitan Water
Supply and Sewerage Act, 1978 with respect to any
provision· regarding water supply or sewerage services '"·.
F and matters connected therewith that may be included in
_any development plan prepared or to be prepared under
this Act for the Chennai Metropolitan Planning Area or any
part thereof.
(2) With ·respect to any such development plan, the
execution of or the carrying out of any work under such
plan shall, in so far it relates to water supply or sewerage
service or matters connected therewith, be entrusted to
and be the sole responsibility of the Chennai Metropolitan
Water Supply and Sewerage Board, and if any work under
H such plan is in the process of being executed or carried
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 667
MET. DEV. AUTH. & ANR. [ S.B. SINHA J. ]

A out on the date of coming into force of this section, the A
Chennai Metropolitan Development Authority shall
continue and complete such work in accordance with
section 27 of the Chennai Metropolitan Water Supply and
Sewerage Act, 1978.
B
xxx: xxx: xxx:
59. Levy of development charges.-(1) Subject to the
provisions of this Act and the rules made thereunder every
planning authority including a local authority where such
local authority is the planning authority, shall levy charges c
(hereinafter called the development charges) on the
institution of use or change of use of land or building or
development of any land or building for which permission
is required under this Act in the whole area or any part of
the planning area within the maximum rates specified in D
section 60:
Provided that the rates of development charges may be
different for different parts of the planning area and for
different uses:
E
Provided further that the previous sanction of the
Government has been obtained for the rates of levy.

(2) When a planning authority including a local authority
where such local authority is the planning authority shall
have determined to levy development charges for the first F
time or at a new rate, such authority shall forthwith publish
a notification in the Tamil Nadu Government Gazette
specifying the rates of levy of development charges.
(3) The development charges shall be livable on any person G
. wbo undertakes or carries out any such development or
~
institutes or changes any such use.

(4) Notwithstanding anything contained in sub-section (1)
and (2), no development charges shall be levied on
H
668 SUPREME COURT REPORTS [2009] 2 S.C.R.

,_
~-
A development, or institution of use or of change of use of, h
any land or building vested in or under the control or any
State Government or of any local authority.
xxx xxx xxx
B 63-A. Apportionment of development charges in
certain cases.-Where any development charges are
levied or recovered under the provisions of this Chapter
in respect of the use or change of use of land or building
or development of any land or building in the Channai
c Metropolitan Planning Area, and if any such chare or any
part, thereof is relateable to provision for or improvement
of water supply or sewerage service, the Chennai
Metropolitan Development Authority shall pay over the
Chennai Metropolitan Water Supply and Sewerage Board
D constituted under the Chennai Metropolitan Water Supply
and Sewerage Act, 1978, such charge or part thereof."
7. The 1978 Act was enacted to provide for the constitution
of Sewerage Board to attend to the growing needs and for
proper development and regulation of water supply and
E
sewerage services in the Chennai Metropolitan Area. Relevant
provisions of 1_~78 Act are as under :
2.(f) "local authority" means -
(i) the Municipal Corporation of Chennai; or
F
xxx xxx xxx
(v) the Tamil Nadu Water Supply and Drainage Board
constituted under Section 4 of the Tamil Nadu Water
Supply and Drainage Board Act, 1970 (Tamil Nadu
G Act No.4 of 1971) (hereinafter referred to as the Tamil
f
Nadu Water Supply and Drainage Board); or

xxx xxx xxx
/
(vii) the Chennai Metropolitan Development Authority
H
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 669
MET. DEV. AUTH. & ANR. [ S.B. SINHA J. ]

established under Section 9-A of the Tamil Nadu Town A
and Country Planning Act, 1971 (Tamil Nadu Act
No.35 of 19721 ), (hereinafter referred to as the
Chennai Metropolitan Development Authority)
xxx xxx xxx
B
6. Powers of the Board.-(1) The Board shall, subject
to the provisions of this Act, have the power to do anything
y
which may be necessary or expedient for the purpose of
carrying out its functions and duties under this Act.
(2) Without prejudice to the generality of the foregoing c
provision, the Board shall have the power -
-'

(i) to take over all existing responsibilities, powers,
controls, facilities, services and administration
relating to water supply and sewerage in or for the
D
~
Chennai Metropolitan Area;
(ii) to enlarge, improve or develop existing facilities and
to construct and operate new facilities for water
supply and sewerage in or for the Chennai
Metropolitan Area; E
(iii) to prepare schemes for water supply and sewerage
(including abstraction of water from any natural source
and the disposal of waste and pollution water) in or
for the Chennai Metropolitan Area;
F
xxx xxx xxx
(xii-a)to collect infrastructure development charges from
the applicant builder or developer of such
multistoreyed building or special building as may be
prescribed for the provision of adequate water supply G
or sewerage;
xxx xxx xxx
(xv) to do all things necessary for the purpose of carrying
... out the provisions of this Act." H
670 SUPREME COURT REPORTS [2009] 2 S.C.R.

A 7. Powers of Board to call for information.- The Board
may, for the purpose of carrying out the provisions of this
Act, by notice require any person to furnish such
information in his possession relating to water supply and
sewerage systems, and shall act as a centre for the
B collection and exchange information on such matter, in
order to facilitate the preparation of studies, scheme or
plans and the development of policies which promote the
. purposes of this Act.
81. Power to make regulations.-(1) The Board may
c make Regulations not inconsistent with this Act for carrying
out the purposes of this Act.
(2) In particular and without prejudice to the generality of
foregoing power, such regulations may provide for all or ·
any of the following matters, namely :-
D
(a) to 0) ...
on the manner of and the basis on which the infrastructure
development charges shall be collected;

E (k) to (p)
8. Clause Qj) of Section 81 of the 1978 Act provides for
regulation making power pursuant whereto or in furtherance
whereof the St~te of Tamil Nadu made Regulations in the year
1998 known as The Chennai Metropolitan Water Supply and
F Sewerage Infrastructure Development Charges (Levy and
Collection) Regulations, 1998 in respect of 'manner' and 'basis'
for collection of charges, relevant provisions whereof are as
under:
"3.(a) Applicant mean and includes the applicant builder
G
or development of multi-storeyed buildings or special
buildings as the case may be for the provision of adequate
water supply or sewerage and matters connected thereto.
(b) 'Multi-storeyed building' means and block or buildings
H exceeding of 4 floors and/or 15 meters in height.
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 671
MET. DEV. AUTH. & ANR. [ S.B. SINHA J. ]

(c) 'Special building' means any block or buildings means A
-~
not less than three floor but not exceeding four floors.
(d) 'Infrastructure Development' means any provision
made by the Board regarding water supply and sewerage·
services and matters connected therein.
B
4. The Board shall collect infrastructure development
charges through Chennai Metropolitan Development
Authority from the applicant of multi-storeyed buildings or
"
special building as the case may be for the provision of
adequate water supply or sewerage and the matters c
connected thereto at the flat rate of Rs.64/- per sq. meter
(of the built up area)."
DELEGATION
1
9. On or about 5.3.1998, the Sewerage Board in the 197 h
D
meeting of its Board of Directors resolved to collect infrastructure
,I
development fee at a flat rate of Rs.64/- per square meter and
to authorize CMDA to act as its agent for calculation, collection
and remittance of the infrastructure development charges or IDC
to the Board and to grant NOC to applicant builders of special
E
buildings and multistoreyed flats without referring individual
cases to the Board. An office order being No.9/98 issued on
23.3.1998 by CMDA as regards processing of applications for
planning permission fixing Rs.64/- per square meter as IDC for
.. multi-storeyed building which was to be collected by CMDA and
transfer to Sewerage Board. f,

10. A Government Order being No.146 was also passed
by Housing and Urban Development D~partment directing
CMDA to collect Rs.64/- per square meter from applicants
towards IDC.
G
11. The 1978 Act was amended in terms whereof Sections
6(2)(xii-a) and Section 81 (jj) were inserted empowering the
Sewe_rage Board to collect IDC from applicant, builder or
developer of multi-storeyed or special buildings.
H
672 SUPREME COURT REPORTS [2009] 2 S.C.R.

A 12. Appellant herein applied for planning permission for -+...-.
construction of a multi-storeyed building before CMDA on
8.11.2005. A sum of Rs.53,29,500/- towards development
,
charges was demanded by CMDA in terms of its letter dated '
8.9.2006 including a sum of Rs.5,30,500 towards IDC payable
B to the Sewerage Board for developing water and sewerage
facilities as a pre-condition for considering the said application.
13. It is on the aforementioned premise, the writ petition Y'

was filed which by reason of the impugned judgment has been
dismissed.
c
FINDINGS OF THE HIGH COURT
14. (a) Levy has been made forthe services rendered and
to strengthen and maintain the water supply and sewerage
infrastructure.
D
(b) Levy of development charges is permissible in law in
terms of Section 59 of the 1971 Act.
(c) It helps the applicant to get processed the planning
permission application at one location.
E (d) Special Buildings and multi-storeyed buildings are
responsible for the sudden spurt in demanding the infrastructure
facilities at high rate and sometimes it requires huge investment.
(e) Sections 45 and 56 merely deal with charges for ;.

F consumption of water and guidelines for availing the water and
sewage connection whereas IDC is collected for overall
infrastructure development.
DELEGATION ISSUE

G 15. Indisputably, development charges for land and building
are levied in terms of the provisions of Section 59, 60 and 69 of
the 1971 Act. Such charges are payable at the time of seeking Cf
~
planning permission for the development of land and building.
The stipulated charges, at the relevant time, was Rs.1,00,000/-
per hectare in the case of development of land and Rs.25/- per
H
.....

M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 673
MET. DEV. AUTH. & ANR [ S.B. SINHA J. ]

square meter in the case of buildings. Water and sewage A
_,, charges are levied in terms of Sections 45 and 56 of 1978 Act,
which are required to be paid to the Sewerage Board at the
time of seeking connection.
16. As noticed hereinbefore, IDC at the rate of Rs.64/- per
square meter is levied only on builders or developers of special B
buildings or multi-storeyed buildings in terms of Section 6(2)(xii-
a) of 1978 Act and Regulations made pursuant to the
.>(
amendment of Section 81 (2)0j) thereof. IDC indisputably is in
addition to the charges levied under Sections 59, 60 and 6 1 of
1971 Act and Sections 45 and 56 of 1978 Act. c
17. Regulations, as noticed hereinbefore, were framed as
regards, 'manner' and 'basis' for collection of charges.
18. The High Court opined that as the CMDA had been
empowered to collect the said charges in terms of the D
Regulations by reason of a resolution of the Board of Directors
~
of the Sewerage Board in its meeting held on 5.3.1998, the
'l
same is valid in law.
19. The Sewerage Board is a State within the meaning of
Article 12 of the Constitution of India. It is a creature of a statute. E
It can delegate its power provided there exists a provision in
the Act. Power to delegate, thus, being a statutory requirement
must find its place in the principal Act itself and nof in the
Regulation. The High Court, in our opinion, has asked unto itself
" a wrong question. The appropriate question required to be F
posed was not as to whether the CMDA was appointed as an
agent, but was as to whether the Sewerage Board could
delegate its power to CMDA. It may have some advantages.
But the same may not answer the legal requirement.
G
" 20. Mr. Krishnamurty, however, has submitted that the
~
Sewerage Board is bound by the direction issued by the
Government.

CMDA may be a local authority within the provisions of the
1978 Act but it is an independent body. Prima facie, there is H
,,i:
I
~

674 SUPREME COURT REPORTS [2009) 2 S.C.R.

A nothing to show that it has any statutory role to play in the
t~
functioning of the Sewerage Board. As a local authority, it has ~
certain duties to perform. It, however, appears that the function
relating to water supply and sewage services are vested in the
I
Board itself. It was, therefore, the Board which could levy the
B charges. It had such a power in terms of Sections 45 and 54 of
( __
the Act. Our attention has been drawn to Section 78(b) of the
Act to contend that the Government has power to issue orders
and directions. Such orders and directions can be issued when '!<

the Government forms an opinion that the same are necessary
c or expedient for carrying out the purpose of the Act. Directions )
cannot be issued in respect of the matters which are beyond '·--
the provisions of the statute.
21. However, it appears that Section 81 (2)Gj) which was
inserted by Tamil Nadu Act 49 of 1988, the Board has been
,__
D empowered to frame regulations in relation to the 'manner' and
'basis' on which the IDC shall be collected. In terms of the ._
t-
aforementioned power, Regulation 4 has been made in terms I
I
whereof CMDA has been authorized to collect IDC. Thus, the ~
}
matter providing for collection of IDC is a matter of procedure
E and not a substantive provision. It, in that view of the matter, is
not a delegation of power. CMDA is not appropriating any fund
collected on behalf of the Sewerage Board. It has no power to >-
utilise any amount. The power of collection is merely an incidental ~
,.
•'
power. They have no power to assess or appropriate the same;
F the rate having been fixed.
22. Although for different reasons. we, thus, uphold that
,___
part of the order of the High Court on this count. I
QUID PRO QUO
l
G 23. State or the Board did not state as to on what basis '·
the rate of Rs.64/- per square meter was fixed. What was the '
~
amount to be spent towards services to be rendered to the multi-
storeyed and special buildings had not been spelt out. What
had merely been stated was that the amount was necessary to
H be spent for overall development of the water supply and
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 675

" MET. DEV. AUTH. & ANR. [S.S. SINHA J. ]

sewerage system. It is not contended before us that IDC is not A
..... a fee but a tax. If it is a fee, the principle of quidpro quo shall
apply. Like a State, all other authorities who are statutorily
empowered to levy the same must spell out as to on what basis,
the same is charged. The State has not placed any material
before the High Court. The High Court has also not addressed B
itself properly on the same issue. It failed to pose unto itself a
relevant question. It proceeded on the basis as if over all
Pl(
development charges by itself is sufficient to levy a fee without
spelling out how the services rendered will satisfy the
equivalence doctrine for the purpose of levy and collection of c
fees.
24. In Sri Krishna Das v. Town Area Committee, Chirgaon
[(1990) 3 SCC 645], this Court observed :
"22. A fee is paid for performing a function. A fee is not
D
ordinarily considered to be a tax. If the fee is merely to
compensate an authority for services performed or as
compensation for the services rendered, it can hardly be
called a tax. However, if the object of the fee is to provide
general revenue of the authority ratherthan to compensate
it, and the amount of the fee has no relation to the value E
of the services, the fee will amount to a tax. In the words
of Cooley, "A charge fixed by statute for the service to be
performed by an officer, where the charge has no relation
to the value of the s~rvices performed and where the
amount collected eventually finds its way into the treasury F
of the branch of the government whose officer or officers
collect the charge is not a fee but a tax."
23. Under the Indian Constitution the State Government's
power to levy a ta~ is not identical with that of its power to
G
levy a fee. While the powers to levy taxes is conferred on
the State legislatures by the various entries in List II, in it
there is Entry 66 relating to fees, empowering the State
Government to levy fees "in respect of any of the matters
in this list, but not including fees taken in any court" .-The
H
676 SUPREME COURT REPORTS [2009] 2 S.C.R. .....
I

lilJI
·f,
A result is that each State legislature has the power, to levy '
~

fees, which is co-extensive with its powers to legislate
with respect to substantive matters and it may levy a fee
'· J-

with reference to the services that would be rendered by
the State under such law. The State may also delegate
B such a power to a local authority. When a levy or an
imposition is questioned, the court has to inquire ir:ito its
real nature inasmuch as though an imposition is labelled i=
r
as a fee, in reality it may not be a fee but a tax, and vice
versa. The question to be determined is whether the power "
c to levy the tax or fee is conferred on that authority and if it
falls beyond, to declare it ultra vires.
24. We have seen that a fee is a payment levied by an
authority in respect of services performed by it for the
benefit of the payer, while a tax is payable for the common 'I
D benefits conferred by the authority on all tax payers. A fee
is a payment made for some special benefit enjoyed by
I..
the payer and the payment is proportional to such benefit.
Money raised by fee is appropriated for the performance
of the service and does not merge in the general revenue.
E Where, however, the service is indistinguishable from the
public services and forms part of the latter it is necessary
to inquire what is the primary object of the levy and the ;,.

essential purpose which it is intended to achieve. While
~
there is no quid pro quo between a tax payer and the
F authority in case of a tax, there is a necessary co-relation
between fee collected and the service intended to be
rendered. Of course the quid pro quo need not be
understood in mathematical equivalence but only in a fair
correspondence between the two. A broad co-relationship
is all that is necessary." ~
G
In Jindal Stainless Ltd. (2) & Anr. v. State of Haryana &
Ors. ((2006) 7 SCC 241], a Constitution Bench of this Court }

stated:
"40. Tax is levied as a part of common burden. The basis
H
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 677
MET DEV. AUTH. & ANR. [ S.B. SINHA J. ]

of a tax is the ability or the capacity of the taxpayer to pay. A
The principle behind the levy of a tax is the principle of
ability or capacity. In the case of a tax, there is no
identification of a specific benefit and even if such
identification is there, it is not capable of direct
measurement. In the case of a tax, a particular advantage, B
if it exists at all, is incidental to the State's action. It is
assessed on certain elements of business, such as,
manufacture, purchase, sale, consumption, use, capital,
etc. but its payment is not a condition precedent. It is not
a term or condition of a licence. A fee is generally a term c
of a licence. A tax is a payment where the special benefit,
if any, is converted into common burden.
41. On the other hand, a fee is based on the "principle of
equivalence". This principle is the converse of the "principle
D
of ability" to pay. In the case of a fee or compensatory tax,
• the "principle of equivalence" applies. The basis of a fee
or a compensatory tax is the same. The main basis of a
fee or a compensatory tax is the quantifiable and
measurable benefit. In the case of a tax, even if there is
E
any benefit, the same is incidental to the government action
and even if such benefit results from the government action,
the same is not measurable. Under the principle of
equivalence, as applicable to a fee or a compensatory
"'
tax, there is an indication of a quantifiable data, namely,
a benefit which is measurable." F

In Mumbai Agricultural Produce Market Committee & Anr
v. Hindustan Lever Ltd. & Ors. [(2008) SCC 575], this Court
observed:
G
"14. The quantum of recovery, however, need not be based
on mathematical exactitude as such cost is levied having
regard to the liability of all the licensees or a section of
them. It would, however, require some calculation."

It was further stated : H
678 SUPREME COURT REPORTS [2009] 2 S.C.R.

A ''18. Cost of supervision, if borne by the State has to be ....__
recovered by it. The burden was, therefore, on the State
to justify the levy. Even the general or special order, if any,
purported to have been issued by the State has not been
brought on record. On what basis, the supervision charges
B were being calculated is not known. The premise for levy
or recovery of the amount of supervisory charges is not
founded on any factual matrix. Only the source of the power
has been stated but the basis for exercise of the power
has not been disclosed."
c
Recently, in Mohan Meakin Ltd. v. State of H.P. & Ors.
[2009 (1) SCALE 51 O], this Court opined that the jurisdiction of
the State to impose such a levy is limited. When a fee is levied,
the question as regards 'aspects of power to levy fee vis-a-vis
D tax' must be borne in mind.

25. Furthermore, it was held in A.P. Paper Mills Ltd. v. •
Govt. of A.P. and Another [(2000) 8 sec 167] that even if a fee
is levied for issuance of permit, it was only for the purpose of
recovering the administrative charges. [See also Ashok Lanka
E:
and Another v. Rishi Dixit and Others (2005) 5 SCC 598].
This Court in Kera/a Samsthana Chethu Thozhilali Union
v. State of Kera/a and Others [(2006) 4 SCC 327], upon noticing
State of Kera/a and Others v. Maharashtra Distilleries Ltd. and
..
F Others [(2005) 11 SCC 1], opined:
"39. In State of.Kera/a v. Maharashtra Distilleries Ltd.
this Court took notice of the provisions of Section 18-A of
the Act. It was held that the State had no jurisdiction to
G realise the turnover tax from the manufacturers in the garb
of exercising its monopoly power. It was held that turnover
>--
tax cannot be directed to be paid either by way of excise
duty or as a price of privilege."

26. Even while levying a fee, a quantum jump is deprecated.
H
M. CHANDRU V. THE MEMBER SECRETARY, CHENNAI 679
MET. DEV. AUTH. & ANR. [S.S. SINHA J. ]

In Indian Mica Micanite Industries v. The State of Bihar A .
and Others [(1971) 2 SCC 236], it has been held:
"17 ... There cannot be a double levy in that regard. In the
opinion of the High Court the subsequent transfer of
denatured spirit and possession of the same in the hands
of various persons such as wholesale dealer, retail dealer 8
or other manufacturers also requires close and effective
supervision because of the risk of the denatured spirit
being converted into palatable liquor and thus evading
heavy duty. Assuming this conclusion to be correct, by
doing so, the State is rendering no service to the consumer. C
It is merely protecting its own rights. Further in this case,
the State which was in a position to place material before
the Court to show what services had been rendered by it
to the appellant and other similar licensees, the costs or ·
at any rate the probable costs that can be said to have D
been incurred for rendering those services and the amount
realised as fees has failed to do so. On the side of the
appellant, it is alleged that the State is collecting huge
amount as fees and that it is rendering little or no service
· in return. The co-relationship between the services E
rendered and the fee levied is essentially a question of
fact. Prima facie, the levy appears to be excessive even
if the State can be said to be rendering some service to
the licensees. The State ought to be in possession of the
material from which the co-relationship between the levy F
and the services rendered can be established at least in
a general way. But the State has not chosen to place those
materials before the Court. Therefore the levy under the
impugned Rule cannot be justified."
In this case, the State in fact has not produced any material G
whatsoever before the High Court, which it was required for
meeting the challenge on imposition of fee by it.
27. As in the case of Mohan Meakin Ltd., in this case also
no justification for levy of fee has been placed before the High H
680 SUPREME COURT REPORTS [2009] 2 S.C.R.

A Court, we are of the opinion that the matter should be remitted
to the High Court for consideration of the matter afresh.
In the writ petition, State of Tamil Nadu may be impleaded
as a party. The parties shall be at liberty to produce such material
before the High Court for justification for levy of fee. The State
8 of Tamil Nadu is directed to file an affidavit before the High Court
to justify the levy of fee. The affidavit should be filed within four
weeks.
28. The impugned order is set aside. The appeals are
c allowed. The High Court is requested to dispose of the matter
as expeditiously as possible. No costs.

R.P. Appeals allowed.