Sakthi Pipes Ltd. vs Regional Director, Employees' State Insurance Corporation, Madras

Govindan Nair, C.J.—This appeal is against the order of Koshal, J. dismissing W.P. 3450 of 1975 following the Bench decision of this

Court in K.S. Sundaresan v. Employees'' State Insurance Corporation through Insurance Inspector L.P.A. 75 to 77 of 1965 in A.A.O. 287 to

289 of 1961. The short question that arises for determination is whether in view of the fact Chapters IV and V of the Employees'' State Insurance

Act, 1948 (hereinafter called ''the Act'') not having been brought into force in the area where the appellant''s establishment or factory is situate, the

claim for the special contribution envisaged by S.73-A in Chapter V-A of the Act is maintainable on the ground that in the absence of Chapters IV

and V being made applicable, no special contribution can be claimed. The appellant had claimed also the refund of the amounts admittedly paid by

them for the earlier period. The demand that was sought to be raised related to a sum of Rs. 6,716 said to be the special contribution for the

period from 30 June, 1972 to 30th September, 1972 and Rs. 1,025 being the interest thereon.

Counsel on behalf of the appellant relied on a decision of the Orissa High Court in Hindustan Aeronautics Ltd. v. Regional Director 1974 2

L.L.J. 115 as also a decision of the Andhra Pradesh High Court in Food Fats and Fertilizers Ltd. v. The Regional Director, Employees'' State

Insurance Corporation. ILR (1972) A.P. 1103. No doubt, the decisions support the appellant''s case, but as was pointed out by the counsel for

the respondent, these decisions have been rendered on a concession being made by the Revenue that the impost under the Act is a fee and not a

tax. The decision of this Court already referred to was based on the decision in Anand Kumar v. Employees'' State Insurance Corporation AIR

1957 All. 136. There is a full discussion of the question involved in the judgment therein and the learned Judges came to the conclusion that the

impost under the Act is a tax. Thus, the question that arises in the ultimate analysis before us for our determination is whether the impost under the

Act is a tax or a fee.

We have the famous dicta in the well-known Australian case of Mathews v. Chicory Marketing Board 60 C.L.R. 263-D of Latham, C.J.,

(referred to by Mootham, C.J.), in Anand Kumar Bindal Vs. Employees'' State Insurance Corporation and Others, which found acceptance by the

Supreme Court in an appeal from a decision of this Court in the case in Commissioner, Hindu Religious and Charitable Endowments, Madras v.

Sri Lakshmindra Thirtha Swamiar 1954-1 M.L.J. 596 (S.C.)=67 L.W. 1220. The learned Chief Justice defined tax thus:

a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.

The special contribution payable and collected under the Act are to be credited to the Employees'' State Insurance fund in accordance with the

provisions of the Act. The levy, tax or fee, is a compulsory exaction, there can be little doubt. If it is an exaction by a public authority also as is

clear the position is that it is for a public purpose. The only question then is whether the exaction is a payment for services rendered or is not a

payment for services rendered. If it is an exaction in return for services rendered, the exaction can only be a fee. On the other hand, if it is not for

services rendered, it would be a tax.

The Supreme Court in the decision in Commissioner, Hindu Religious and Charitable Endowments. Madras v. Sri Lakshmindra Thirtha

Swamiar 1954-1 M.L.J. 596 (S.C.)=67 L.W. 1220 already referred to, had to consider the question whether the impost under the Madras Hindu

Religious and Charitable Endowments Act was a fee or not. They relied on the definition which we have referred to and came to the conclusion

that it was not a fee. No point was made whether if it is not a fee, it would still amount to tax. It appears to have been assumed that if it is not a fee,

the impost was in the nature of a tax. The one distinguishing feature of that case from the case before us is that the amounts collected under the

Act, which came up for consideration before the Supreme Court, were funded to the consolidated fund of the State and became the revenue of the

State. This fact was emphasized by the Supreme Court in that decision. ""This is expressed"" said the Supreme Court at page 295:

by saying that the levy of tax is for the purpose of general revenue, which when collected farms part of the public revenues of the State.

All the collections"" the Court pointed out:

go to the consolidated fund of the State and all the expenses have to be met not out of these collections but out of the general revenues by a proper

method of appropriation as is done in the case of other Government expenses.

From the passages we have extracted, it is evident that the aspect of the funds collected mingling with other revenues of the State and becoming a

part of the general revenue, indistinguishable after it has been mixed with the other general revenues, was emphasized by the Supreme Court in the

decision in Commissioner, Hindu Religious and Charitable Endowments. Madras v. Sri Lakshmindra Thirtha Swamiar 1954 1 M.L.J. 596=67

L.W. 1220. There was no occasion for the Court to consider whether in the absence of the collections forming part of the general revenue, the

exaction would still be a tax. This matter has, however, been dealt with in the decision of the Canadian Court in Lower Mainland Dairy Products

Sales Adjustment Committee v. Crystal Dairy Ltd. 1933 A.C. 168 (F) which was affirmed by the Judicial Committee of the Privy Council. The

facts of that case disclose that the impost and the collection did not form part of the general revenue and was utilised for the purpose of paying

those who produced the milk and sold it in the fluid condition. Nevertheless, it was held that the exaction was in the nature of a tax. This was also

the view taken by the High Court of Australia in the case already referred to in Mathews v. Chicory Marketing Board 60 C.L.R. 263-D where the

famous dicta of Latham, C.J. finds a place. These decisions have been relied on by the Allahabad High Court in Anand Kumar Bindal Vs.

Employees'' State Insurance Corporation and Others, and the reasoning of that decision appealed to this Court in K. Sundaresan v. Employees

State Insurance Corporation through Insurance Inspector L.P.A. 75 to 77 of 1965 in A.A.O. 237 to 239 of 1961 respectively. We find no reason

why we should now deviate from the view which was taken by this Court. We only wish to add that it is not possible to discern any reasonable

decent nexus between the impost and the benefits which may result to the appellant and others from whom special contributions have been

collected under S. 73-A by reason of their not having to comply with the provisions of the Workmens'' Compensator Act and their not having to

provide medical facilities to their employees. This benefit cannot be said to be a benefit arising from services rendered, nor can the benefits be

related to the impost in such a manner as to form part of the same transaction or transactions. In other words, the direct link between the levy and

the indirect benefits resulting from the provisions of the Act is not esta Wished so as to conclude that the impost is compensated by quid pro quo

of the services rendered. We, therefore, respectfully follow the decision of this Court already referred to, and dismiss this appeal with costs.

Counsel''s fee Rs. 100/-.