In a ruling addressing the vulnerability of millions of workers in the unorganized construction industry, the Supreme Court has upheld the constitutional validity of a 2% levy on the cost of all construction under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (Cess Act).
The case of M/S Dewan Chand Builders & Contractors v Union Of India & Ors centred on a challenge by construction companies to the validity of the Cess Act. The core issue arising for consideration was whether the cess levied is a fee or a tax.
The court rejected the companies’ contention that as there was no correlation between the fee collected and the service intended to be rendered, the cess was a tax. The court held that the sole object of a cess on the cost of construction is to ensure that Welfare Boards, set up under the act to put in place social security schemes and welfare measures for construction workers, have sufficient funds.
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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
