Generally tax is contributed not to a particular fund or corpus but to a general fund, like income tax whereas cess is contributed towards a particular purpose, like education cess. Normally cess is paid on tax and any contribution made to a particular board is termed as fees, as it is understood from the verdict. The arguments that "...strenuously urged that the impost levied by the Cess Act is a compulsory and involuntary exaction, made for a public purpose without reference to any special benefit for the payer of the Cess. It was argued that there exists no co-relationship between the payee of the Cess and the services rendered and therefore, the levy is in effect a tax" have not been accepted by the Apex Court.
Against this arguments, the respondents relied on the fact that " the levy is attracted when there is an activity of building and construction. The collection of cess on the cost of construction is for enhancing the resources of the Building & other Construction Workers' Welfare Boards constituted under the BOCW Act. The Cess so collected is directed to a specific end spelt out in the BOCW Act itself; it is set apart for the benefit of the building and construction workers; appropriated specifically for the performance of such welfare work and is not merged in the public revenues for the benefit of the general public."
Therefore the main arguments were centred on whether it is a tax or cess or fees. Since the very purpose of the Cess Act is 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. Therefore, 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. With these features of the Cess Act in view, the subject levy has to be construed as 'fee' and not a 'tax'.
With a reading of the entire text it is clear that the matter is with regard to its interpretation as to whether Cess is fee or tax and since the amount is not pooled for a general purpose but for a specific purpose of creating fund for the Welfare of Construction workers, it is to be understood as fees and not tax.
Regards,
Madhu.T.K