TMI Blog2011 (11) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the said levy cannot be assailed on the ground that being in the nature of a ‘tax’, it was beyond the legislative competence of Parliament. The levy by the impugned Act is in effect a ‘fee’ and not a ‘tax’ - Decided in favor of revenue - 1830 of 2008 - - - Dated:- 18-11-2011 - D.K. Jain and Asok Kumar Ganguly, JJ. REPRESENTED BY : S/Shri S. Ganesh R.P. Bhatt, Sr. Advocates, Uday Joshi, Nar Hari Singh, Vikas Mehta, R.C. Kaushik, Anupam Varma, Pukhrambam Ramesh Kumar, Vishal Anand, Vishnu Sudarshan, S. Wasim A. Qadri, Ms. Sadhna Sandhu, C.K. Sharma, Ms. Anil Katiyar, Aditya Sharma, S.N. Terdal, D.S. Mahra, Advocates, with them, for the Appearing Parties. [Judgment per : D.K. Jain, J.]. 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 Rs. 25000/-. The High Court has held that The Building and Other Construction Workers (Regulation of Employment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 skilled, semi-skilled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout such registration, the employer of an establishment, to which the BOCW Act applies, cannot employ building workers. Chapter IV of the BOCW Act contains provisions stipulating the registration of building workers as beneficiaries and requires certain contributions to be made by such beneficiary at such rate per month as may be specified by the State Government. Where the worker is unable to pay his contribution due to any financial hardship, the Board can waive the payment of such contribution for a period not exceeding three months at a time. Chapter V of the BOCW Act sets out the constitution and functions of the Building and Other Construction Workers Welfare Boards. Section 24 sets out the provision for the constitution of the Welfare Fund and its application. Part III of Chapter VI of the BOCW Act contains provisions concerning the safety, health and welfare of the construction workers generally and with reference to specific kinds of activities. It is thus, clear from the scheme of the BOCW Act that its sole aim is the welfare of building and construction workers, directly relatable to their constitutionally recognised right to live with basic human dignity, en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om time to time specify. (2) The Cess levied under Sub-section (1) shall be collected from every employer in such manner and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking or advance collection through a local authority where an approval of such building or other construction work by such local authority is required, as may be prescribed. (3) The proceeds of the Cess collected under Sub-section (2) shall be paid by the local authority or the State Government collecting the Cess to the Board after deducting the cost of collection of such Cess not exceeding one per cent of the amount collected. (4) Notwithstanding anything contained in Sub-section (1) or Sub-section (2), the Cess leviable under this Act including payment of such Cess in advance may, subject to final assessment to be made, be collected at a uniform rate or rates as may be prescribed on the basis of the quantum of the building or other construction work involved. Section 4 of the Cess Act requires every employer to file a return in the manner prescribed. Section 5 spells out the process for the assessment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered from the contractor. The Cess Act and the Cess Rules ensure that the Cess is collected at source from the bills of the contractors to whom payments are made by the owner. In short, the burden of Cess is passed on from the owner to the contractor. 9. Although both the statutes were enacted in 1996, the Central Government in exercise of its powers under Section 62 of the BOCW Act notified the Delhi Building and Other Construction Workers (RE CS), Rules, 2002 (for short the Delhi Rules ) vide Notification No. DLC/CLA/BCW/01/19 dated 10th January, 2002. Accordingly, Government of NCT of Delhi constituted the Delhi Building and Other Construction Workers Welfare Board vide Notification No. DLC/CLA/BCW/02/596, dated 2nd September, 2002. Thus, the Cess Act and the Cess Rules are operative in the whole of NCT of Delhi w.e.f. January, 2002. 10. As noted above, the principal ground for challenge to the validity of the Cess Act is the lack of legislative competence of the Parliament. Mr. Uday Joshi, learned counsel appearing on behalf of the appellant, strenuously urged that the impost levied by the Cess Act is a compulsory and involuntary exaction, made for a public purpose wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act : (i) it is a tax and not a cess because no element of quid pro quo exists between the payer of the cess and the beneficiary and (ii) if it is a tax then it is a tax on lands and buildings falling within the ambit of Entry 49 List II (the State List) of the Seventh Schedule, ousting the legislative competence of the Parliament. 14. Thus, the core issue arising for consideration is whether the cess levied under the scheme of the impugned Cess Act is a fee or a tax . Before embarking on an evaluation based on the said submissions, it would be apposite to briefly examine the concept of tax and fee . 15. The question whether a particular statutory impost is a tax or fee has arisen as a challenge in several cases before this Court, which in turn necessitated the demarcation between the concepts of Cess , tax and fee . The characteristics of a fee, as distinct from tax, were explained as early as in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt - AIR 1954 SC 282 (generally referred to as the Shirur Mutt s Case ). The ratio of this decision has been consistently followed as a locus classicus in sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the benefit of a specified class or area the fact that in benefiting the specified class or area the State as a whole may ultimately and indirectly be benefited would not detract from the character of the levy as a fee. Where, however, the specific service is indistinguishable from public service, and in essence is directly a part of it, different considerations may arise. In such a case it is necessary to enquire, what, is the primary object of the levy and the essential purpose which it is intended to achieve. Its primary object and the essential purpose must be distinguished from its ultimate or incidental results or consequences. That is the true test in determining the character of the levy. (Emphasis supplied by us) 16. On the basis of the above considerations, this Court in the aforementioned case, examined the scheme of the Act impugned in that case in depth and opined that the primary and the principal object of the Act was to develop the mineral areas in the State and to assist in providing more efficient and extended exploitation of its mineral wealth. The Cess levied did not become a part of the consolidated fund and was not subject to an appropriation in that beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion workers. The fund, so collected, is directed to specific ends spelt out in the BOCW Act. Therefore, applying the principle laid down in the aforesaid decisions of this Court, it is clear that the said levy is a fee and not tax . The said fund is set apart and appropriated specifically for the performance of specified purpose; it is not merged in the public revenues for the benefit of the general public and as such the nexus between the Cess and the purpose for which it is levied gets established, satisfying the element of quid pro quo in the scheme. With these features of the Cess Act in view, the subject levy has to be construed as fee and not a tax . Thus, we uphold and affirm the finding of the High Court on the issue. 20. At this juncture, we may also deal with the argument of learned counsel appearing for the appellant that, since there exists no quid pro quo between the payer (contractors) of the fee and the ultimate beneficiary (workers) of the services rendered, the said levy is in fact a tax. While it is true that quid pro quo is one of the determining factors that sets apart a tax from a fee but the concept of quid pro quo requires to be understood in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area of class; it may be of no consequence that the State may ultimately and indirectly be benefited by it. The power of any legislature to levy a fee is conditioned by the fact that it must be by and large a quid pro quo for the services rendered. However, correlationship between the levy and the services rendered (sic or) expected is one of general character and not of mathematical exactitude. All that is necessary is that there should be a reasonable relationship between the levy of the Fee and the services rendered. (Emphasis supplied) 23. Viewed from this perspective, the inevitable conclusion is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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