In a setback to construction companies, the Supreme Court has upheld the validity of a parliamentary legislation levying a special cess on builders and contractors to create a corpus to fund welfare measures for unorganised sector workers.
The judgment, delivered by Justice DK Jain and Justice AK Ganguly, would enable better working conditions for workers in the construction industry. The bench rejected the plea of Dewan Chand Builders and other contractors questioning the legislative competence of the Parliament in framing the act. The petitioner had claimed there was no nexus between the levy and the intended purpose.
"There does exist a reasonable nexus between the payer of 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 verdict noted, while dismissing the builders' appeal.
In their plea, the builder lobby had challenged the Delhi high court judgment dismissing their plea challenging the cess levied under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW).
Interpreting the Act, SC ruled: "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, enshrined in Article 21 of the Constitution of India."
The bench further held that levy of cess on the cost of construction incurred by the employers on the building and other construction works was for ensuring sufficient funds for the welfare boards to undertake social security schemes and welfare measures for the workers.