Statutory levy as a fee ends when surplus makes collections disproportionate to special services rendered.

A statutory levy is treated as a fee only while there is a reasonable correlation between collections and the cost of special services rendered to the regulated class. On the facts, the contribution under Section 58 read with Rule 32 remained valid as a fee up to 31 March 1970, but the accumulated surplus had then grown beyond what was reasonably required, so continuation at the same rate thereafter could no longer be justified as a fee and became a tax without authority of law. The Court also treated the three receipts from an international organisation as donations exigible under the amended provision with retrospective effect, leaving the respondent liable to contribute on those sums.

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Issues: (i) whether the contribution levied under Section 58 read with Rule 32 was a fee at inception and, if so, whether it became a tax after accumulation of surplus by 31 March 1970; and (ii) whether contribution was payable on the three donations received from the international organisation.

Issue (i): whether the contribution levied under Section 58 read with Rule 32 was a fee at inception and, if so, whether it became a tax after accumulation of surplus by 31 March 1970

Analysis: The contribution was imposed to finance administration, supervision, registration, control and protection of public trusts, which were treated as special services for the benefit of the trusts. A levy in the nature of a fee need not have mathematical equivalence with expenditure, but there must be a reasonable correlation between the collections and the services rendered. The Court held that the levy did not become a tax merely because surplus had accumulated over the years up to 31 March 1970, but by that date the surplus had grown beyond what was reasonably required for the efficient working of the organisation, and continuation of the levy at the same rate without regard to that surplus could no longer be justified as a fee.

Conclusion: The levy was valid as a fee up to 31 March 1970, but thereafter the 2 per cent levy became a tax and was without authority of law.

Issue (ii): whether contribution was payable on the three donations received from the international organisation

Analysis: The respondent had independent legal personality, and the amounts received were donations within the meaning of Section 58 and Rule 32. By virtue of the amended Section 58 and the retrospective operation given by Section 4 of the Amending Act of 1962, the donations became exigible in the years in which they were received. The later date of actual demand did not extinguish the liability, and the Court rejected the view that the levy had already become invalid for those receipts.

Conclusion: The respondent was liable to pay contribution on the three donations, and the orders quashing the levy on those sums were ? no, were set aside.

Final Conclusion: The appeal succeeded in part: the levy was upheld as a fee for the earlier period, but the respondent remained liable for contribution on the three donations, while the rate of levy became impermissible after 31 March 1970.

Ratio Decidendi: A statutory levy is a fee only so long as collections maintain a reasonable correlation with the cost of special services rendered for the regulated class; when the accumulation of surplus makes the levy disproportionate to those services, it ceases to be a fee and assumes the character of a tax.

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