Apex court rules cess on builders constitutionally valid
In a relief to millions of workers in the building and construction sectors, the Supreme Court has upheld the finding of the Delhi High Court that certain legislations and rules – which allowed the levy of a cess on builders and contractors to create a fund for welfare of these employees, were Constitutionally valid. The court turned down the contention of the appellants – Dewan Chand Builders and Contractors – that the cess was a “tax” and that there was no nexus between the levy and the intended purpose.
The court said, “The inevitable conclusion is that in the instant case there does exist a reasonable nexus between the payer of the Cess and the services rendered for that industry and 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 principal ground for challenge to the validity of The Building and Other Construction Workers Welfare Cess Act (or the Cess Act), 1996 by the appellants was the lack of legislative competence of Parliament. The core issue arising for consideration was whether the cess levied under the scheme of the Cess Act is a ‘fee’ or a ‘tax’.
The apex court said, “There is no doubt in our mind that the Statement of Objects and Reasons of the Cess Act, clearly spells out the essential purpose (of what) the enactment seeks to achieve, that is to augment the Welfare Fund under The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (or the BOCW Act).”
“It is 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, enshrined in Article 21 of the Constitution of India,” it said. “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. 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 court said.
Earlier, the Delhi High Court had rejected the builders’ plea challenging the cess levied under the BOCW Act. The Statement of Objects and Reasons of the BOCW Act says, “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.”
Its preamble says that it is “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.”
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