IMPORTANT POINT
The true test to determine the character of a levy, delineating ‘tax’ from ‘fee’ is the primary object of the levy and the essential purpose intended to be achieved.

Headnote:Constitution of India,1950-Entry 97 of List-I of the Seventh Schedule -The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 -The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Central Rules, 1998- The Building and Other Construction Workers Welfare Cess Act, 1996 -The Building and Other Construction Workers Welfare Cess Rules, 1998 - Appeals against judgment and final order passed by High Court , whereby, it held that BOCW Act; “1998 Central Rules”; “the Cess Act” and “the Cess Rules” were constitutionally valid and within the competence of Parliament as levy under the impugned enactments was a “fee”, referable to Entry 97 of List-I of the Seventh Schedule of Constitution of India-Held Statement of Objects and Reasons of the Cess Act, clearly spells out the essential purpose, the enactment seeks to achieve i.e. to augment the Welfare Fund under the BOCW Act- The levy of Cess on the cost of construction incurred by the employers on the building and other construction works is for ensuring sufficient funds for the Welfare Boards to undertake social security schemes and welfare measures for building and other construction workers- The fund, so collected, is directed to specific ends spelt out in the BOCW Act- Hence held that said levy is a `fee’ and not `tax’- In the instant case since there existed a reasonable nexus between payer of the Cess and the services rendered for that industry ,said levy could not be assailed on the ground that being in the nature of a `tax’, it was beyond the legislative competence of Parliament-No infirmity found in the conclusions arrived at by High Court while upholding the validity of the impugned Acts-Appeals dismissed (Paras 23 to 25)
       Facts of the Case :
        A. Present Appeals have been filed against judgment and final order passed by High Court , whereby, it held that BOCW Act; “1998 Central Rules”; “the Cess Act” and “the Cess Rules” were constitutionally valid and within the competence of Parliament as levy under the impugned enactments was a “fee”, referable to Entry 97 of List-I of the Seventh Schedule of Constitution of India. Plea of appellant that principal ground for challenge to validity of the Cess Act was the lack of legislative competence of the Parliament.
        B. Core issue arising for consideration was whether the cess levied under the scheme of the impugned Cess Act was a ‘fee’ or a ‘tax’.
       Findings of the Court :
        A. In the instant case since there existed a reasonable nexus between payer of the Cess and the services rendered for that industry ,said levy could not be assailed on the ground that being in the nature of a ‘tax’, it was beyond the legislative competence of Parliament. No infirmity was found in the conclusions arrived at by High Court while upholding the validity of the impugned Acts. Appeals were dismissed

JUDGMENT

D.K. Jain, J.:

1. These appeals, by special leave, arise out of judgment and final order dated 28th February, 2007 in W.P.(C) No.3620/2003 [connected with W.P.(C) Nos.216-17 of 2006]; W.P.(C) Nos.7480-81/2006 & CM No. 5879/2006, and W.P.(C) Nos.7485-87/2006 & CM No.5886/2006] rendered by the High Court of Delhi, whereby, the said petitions were dismissed with costs of ‘25000/-. The High Court has held that The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (for short “the BOCW Act”); The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Central Rules, 1998, (for short the “1998 Central Rules”); The Building and Other Construction Workers Welfare Cess Act, 1996 (for short “the Cess Act”) and The Building and Other Construction Workers Welfare Cess Rules, 1998 ( for short “the Cess Rules”) are constitutionally valid and within the competence of the Parliament as the levy under the impugned enactments is a “fee”, referable to Entry 97 of List-I of the Seventh Schedule of the Constitution of India.

2. Since all the appeals involve a common pure question of law, these are being disposed of by this common judgment. For deciding the subject issue before us viz. constitutional validity of the Cess Act, even a reference to the factual aspects is unnecessary, except to note that the appellant in these appeals is a contractor, engaged in building and other construction works in the National Capital Territory of Delhi.

3. However, before addressing the contentions advanced on behalf of the parties, it will be useful to survey the relevant provisions of both the Acts and the Rules.

4. The background in which the BOCW Act was enacted, is set out in the Statement of Objects and Reasons, appended to the Bill preceding its enactment. To better appreciate the legislative intent, it would be instructive to refer to the following extract from the Statement of Objects and Reasons :

“It is estimated that about 8.5. Million workers in the country are engaged in building and other construction works. Building and other construction workers are one of the most numerous and vulnerable segments of the unorganized labour in India. The building and other construction works are characterized by their inherent risk to the life and limb of the workers. The work is also characterized by its casual nature, temporary relationship between employer and employee, uncertain working hours, lack of basic amenities and inadequacy of welfare facilities. In the absence of adequate statutory provisions, the requisite information regarding the number and nature of accidents is also not forthcoming. In the absence of such information, it is difficult to fix responsibility or to take any corrective action.

Although the provisions of certain Central Acts are applicable to the building and other construction workers yet a need has been felt for a comprehensive Central Legislation for regulating their safety, health, welfare and other conditions of service.”

5. A fairly long preamble to the BOCW Act is again indicative of its purpose. It reads thus:

“An Act to regulate the employment and conditions of service of building and other construction workers and to provide for their safety, health and welfare measures and for other matters connected therewith or incidental thereto.”

Further, Section 1(4) of the BOCW Act makes it clear that it:

“......applies to every establishment which employs, or had employed on any day of the preceding twelve months, ten or more building workers in any building or other construction work.”

Some of the definitions under Section 2 of the BOCW Act, relevant for these appeals are:

(b) “beneficiary” means a building worker registered under Section 12;

(c) “Board” means a Building and Other Construction Workers’ Welfare Board constituted under sub- section (1) of Section 18;

(d) ... ... ...

(e) “building worker” means a person who is employed to do any

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2011 Supreme(SC) 1085

2011 (8) Supreme 381SUPREME COURT OF INDIAD.K. Jain and Asok Kumar Ganguly, JJ.M/s Dewan Chand Builders & Contractors — Appellant versusUnion of India & Ors. — RespondentsCivil Appeal No. 1830 of 2008withCivil Appeal No. 1831 of 2008 andCivil Appeal No. 1832 of 2008Decided on : 18-11-2011

IMPORTANT POINT The true test to determine the character of a levy, delineating ‘tax’ from ‘fee’ is the primary object of the levy and the essential purpose intended to be achieved.

Cases Referred (5)

IMPORTANT POINT
The true test to determine the character of a levy, delineating ‘tax’ from ‘fee’ is the primary object of the levy and the essential purpose intended to be achieved.