Licence fee under factories law treated as a regulatory fee, not a tax, because of sufficient quid pro quo.

The licence fee under Rule 7 read with Rule 5 and the Schedule of the Delhi Factories Rules, 1950 was upheld as a fee and not a tax because the regulatory scheme under the Factories Act, 1948 involved a sufficient element of quid pro quo. The statutory inspectorate provided supervision, regulation, technical guidance, safety oversight, health and welfare administration, and intervention in dangerous conditions. The levy was not shown to have merged into general public revenue, and a substantial part of the amounts collected was spent on services to factory owners. The charge therefore bore a reasonable relation to the cost of the regulatory services.

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Issues: Whether the licence fee prescribed by Rule 7 read with Rule 5 and the Schedule of the Delhi Factories Rules 1950, made under the Factories Act, 1948, was a fee or a tax.

Analysis: The validity of the levy depended on whether there was a sufficient element of quid pro quo, not in the sense of direct arithmetical equivalence, but in the sense that the statutory inspectorate and related machinery rendered services in supervision, regulation, technical guidance, safety, health and welfare administration. The scheme of the Factories Act, 1948 showed that the inspectors had wide duties, including inspection, advice, certification, safety oversight, and intervention where dangerous conditions existed. The collection was not shown to have merged in the general public revenue, and the record supported the finding that a substantial part of the amount realised was spent on services to factory owners. On that basis, the levy bore a reasonable relation to the cost of the regulatory service.

Conclusion: The levy was a fee and not a tax, and the challenge to the rules failed.

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