Report No. 189

Is court fee a fee or a tax?

Levies can generally be divided into two broad categories: fees and taxes. According to De Marco ('First Principles of Public Finance' at p. 78) a 'fee' is a "charge for a particular service of special benefit to individuals or to a class and of general benefit to the public, or it is a charge to meet the cost of regulation that primarily benefits society".

There are various pronouncements of the Supreme Court on the conceptual distinction between 'fee' and 'tax'. It emerges from these pronouncements, that if the essential character of the impost is that some special service is intended or envisaged as a quid pro quo to the class of citizens which is intended to be benefited by the service and there is a broad and general correlation between the amount so raised and the expenses involved in providing the service, the impost would partake the character of a 'fee'. But it loses its character as such if it is intended to and does go to enrich the general revenues of the State which are meant to be applied for general purposes of government.

A Constitution Bench of the Supreme Court in Govt. of Madras v. Zenith Lamps, AIR 1973 SC 724 has held that 'fees taken in Court' are not taxes and cannot be equated to taxes (para 30). The Law Commission in 14th Report after examining the amazing figures of collection of Court fees and expenditure in the administration of civil justice has stated that the Court fee that was being charged was, in fact, no longer a fee and that it was a heavy tax (p. 489). This was held not permissible.