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Issues Involved:
1. Vires of Chapter V-A of the Employees' State Insurance Act, 1948 2. Nature of the contribution under Chapter V-A (whether it is a tax or a fee) 3. Legitimacy of the levy without immediate quid pro quo Detailed Analysis: 1. Vires of Chapter V-A of the Employees' State Insurance Act, 1948 The primary issue raised in the appeal concerns the vires of Chapter V-A of the Employees' State Insurance Act, 1948. Chapter V-A, inserted by Section 20 of Act No. 53 of 1951, provided for a special contribution by the principal employer in lieu of the employer's contribution payable under Chapter IV. This special contribution was applicable in areas where both Chapters IV and V were in force and was to be a percentage, not exceeding five percent of the total wage bill of the employer, as specified by the Central Government. The provisions of Chapter V-A ceased to have effect from July 1, 1973, following a notification issued under Section 73 of the Act. 2. Nature of the Contribution under Chapter V-A (Whether it is a Tax or a Fee) The appellant company argued that the contribution payable under Chapter V-A is a fee and its levy is illegal as the Act does not contemplate the rendering of any service or the conferment of any benefit to the appellant company or its employees as quid pro quo for the payment. The Court addressed this argument by stating that the appellant's approach suffers from a basic defect. The Court clarified that the payment of contributions directed by the Employees' State Insurance Act or other similar social welfare legislations need not be labeled as a tax or a fee to attain legitimacy. The Court emphasized that such contributions fall directly within entries 23 and 24 of List III of the VIIth Schedule of the Constitution, which empower Parliament or the State Legislature to direct the payment by an employer of contributions for the benefit of the employees. 3. Legitimacy of the Levy without Immediate Quid Pro Quo The Court further analyzed whether the levy could be justified as a fee, even without immediate quid pro quo. It was established that services and benefits are indeed meant to be and are bound to be conferred on the employees and through them on the employer, in due course, when the scheme becomes fully operative in all areas. The Court noted that the scheme is analogous to a deferred insurance policy, where benefits are received at a future date, even though the premium is paid from the start. The Court cited the Assam High Court's observation in K.C. Sarma v. Regional Director, E.S.I. Corporation, which stated that the employers' special contribution is not a tax but a fee, and the cost of the benefits will be borne entirely from the Employees' State Insurance fund. The Court also addressed the argument that simultaneity or contemporaneity of levy and service are essential for a fee, referencing Kewal Krishan v. State of Punjab. The Court clarified that the reference to indirectness and remoteness in Kewal Krishan's case was related to the connection between the benefit and the levy, not the timing of the benefit. The Court concluded that whether the special contribution is viewed as a tax, fee, or neither, it has sufficient constitutional protection. The appeal was dismissed with costs, upholding the levy of the special contribution under Chapter V-A of the Employees' State Insurance Act.
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