Kerala High Court
Unknown vs By Advs.Sri.Premjit Nagendran on 16 April, 2007
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE K.SURENDRA MOHAN
MONDAY, THE 28TH DAY OF MAY 2018 / 7TH JYAISHTA, 1940
WP(C).No. 30322 of 2010
PETITIONER(S)
SEAFOOD EXPORTERS ASSOCIATION OF INDIA
(KERALA REGION), SEAFOOD HOUSE, WILLINGDON ISLAND,
COCHIN-682 003, REPRESENTED BY ITS
PRESIDENT-MR.K.G.LAWRANCE.
BY ADVS.SRI.PREMJIT NAGENDRAN
SMT.K.B.SUBHAGAMANI
RESPONDENT(S):
1. STATE OF KERALA
REPRESENTED BY ITS SECRETARY,, LABOR AND WELFARE
DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM.
2. THE SECRETARY,
FISHERIES DEPARTMENT,
SECRETARIAT, THIRUVANANTHAPURAM.
3. THE KERALA FISHERMAN WELFARE FUND BOARD,
REPRESENTED BY ITS CHAIRMAN,
THIRUVANANTHAPURAM.
4. THE DIRECTOR OF FISHERIES,
VIKAS BHAVAN, THIRUVANANTHAPURAM.
R1, R2 & R4 BY GOVERNMENT PLEADER SMT. POOJA SURENDRAN
R-3 BY ADV. SRI.ASOK M.CHARIYAN, SC, KFWFB
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON
23-05-2018 ALONG WITH W.P.(C) NO. 31974 OF 2010, THE COURT ON
28-05-2018 DELIVERED THE FOLLOWING:
W.P.(C) NO. 30322 OF 2010
APPENDIX
PETITIONER'S EXTS:
EXT. P1 : PHOTOSTAT COPY OF THE LIST OF MEMBERS OF THE
ASSOCIATION KERALA REGION.
EXT. P2 : NOTE ON SEAFOOD TRADING ACTIVITY.
EXT. P3 : PHOTOSTAT COPY OF THE REPRESENTATION MADE TO THE
GOVERNOR OF KERALA, DATED 16TH APRIL 2007 SUBMITTED BY THE
PETITIONER.
EXT. P4 : PHOTOSTAT COPY OF THE JUDGMENT IN WRIT APPEAL NO.
2443/2008 DATED 16TH JANUARY 2009 ISSUED BY THIS HONORABLE COURT.
EXT. P5 : PHOTOSTAT COPY OF THE OBJECTION SUBMITTED BY ONE OF THE
MEMBERS BEFORE THE ASSESSING AUTHORITY DATED 18TH NOVEMBER 2008.
EXT.P6 : PHOTOSTAT COPY OF THE LETTER NO.CFFE/17/02/08-09
SUBMITTED BY THE MEMBERS OF THE ASSOCIATION BEFORE THE FOURTH
RESPONDENT DATED 10TH FEBRUARY 2009.
EXT. P7 : PHOTOSTAT COPY OF THE DEMAND ISSUED TO M/S. COCHIN
FROZEN FOOD EXPORT (P) LTD BY THE ASSESSING AUTHORITY DATED 18TH
MARCH 2008.
EXT. P8 : PHOTOSTAT COPY OF THE ORDER IN WRIT APPEAL NO. 1269
DATED 3RD AUGUST 2010 ISSUED BY THIS HONOURABLE COURT.
EXT. P9 : PHOTOSTAT COPY OF THE APPLICATION SUBMITTED BY THE
PETITIONER BEFORE THE PUBLIC INFORMATION OFFICER, THRISSUR DATED
17.8.2010.
EXT. P10 : PHOTOSTAT COPY OF ONE SET OF EXPORT DOCUMENTS
INCLUDING INVOICE, PACKING LIST, PURCHASE ORDER AND BILL OF
LADING.
ANNEXURE A : PHOTOSTAT COPY OF THE LETTER NO. R1A/3074/10 DATED
30/08.2010 BEFORE THE KERALA FISHERMAN WELFARE FUND BOARD,
THRISSUR.
RESPONDENTS' EXTS:
EXT. R1(a) : A TRUE COPY OF THE SCHEME/PROJECT/WELFARE MEASURE
BEING EXTENDED TO THE FISHERMAN.
EXT. R1(b) : A TRUE COPY OF THE STATISTICS ON THE FINANCIAL
REQUIREMENTS OF THE SCHEMES FOR THE PERIOD FROM 1.4.2011 TO
31.05.2012.
C.R.
K. SURENDRA MOHAN, J.
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W.P.(C) Nos.30322 & 31974 of 2010
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Dated this the 28th day of May, 2018
JUDGMENT
Surendra Mohan, J.
The petitioner in W.P.(C) No. 30322 of 2010 is an Association of Sea Food Exporters in the State of Kerala and a Company registered under Section 25 of the Companies Act, 1956. All the members of the petitioner Association are seafood exporters. The petitioners in W.P.(C) No. 31974 of 2010 are also seafood exporters. They have filed these writ petitions challenging the constitutional validity of Section 3(1), 3(2) and 3(3) of the Kerala Fishermen's and Allied Workers Welfare Cess Act, 2007 According to them, the impugned provisions are beyond the legislative competence of the State and consequently, unconstitutional. They have also prayed for W.P.(C) 30322 & 31974/2010.
2a declaration that exporters of sea food are not liable to pay the cess, interest and penalty under the said Act.
2. The grievances of the petitioners date back to the enactment of the Kerala Fishermen's Welfare Fund Act (hereinafter referred to as 'the Welfare Fund Act' for short) in the year 1985. The Act proposed to constitute a Welfare Fund for the fishermen with contributions from the persons engaged in seafood trade. The definition of 'dealer' on whom the liability to pay contributions was cast, included an exporter also. The provisions of the said Act were challenged as unconstitutional before this Court. However, the challenge was unsuccessful. The matter was carried in appeal to the Apex Court. A Constitution Bench of the Supreme Court held Section 4(2) of the Welfare Fund Act to be unconstitutional. According to the petitioners, attempts were made to get over the verdict of the Supreme Court, initially by promulgating the Kerala Fishermen's and Allied Workers' Welfare Cess W.P.(C) 30322 & 31974/2010.
3Ordinance, 2006 and later on by enacting the present Act. The preamble of the Ordinance of 2006 declares that the levy of cess on the sale of fish and fish products was with a view to augment the resources of the Kerala Fishermen's Welfare Fund, for the welfare of the fishermen and allied workers. The Ordinance later on became the Kerala Fishermen's and Allied Workers Welfare Cess Act, 2007 (hereinafter referred to as 'the Cess Act' for short).
3. The Cess Act has been enacted in exercise of the legislative power under Entry 23, List III, Schedule VII of the Constitution. According to the petitioners, inasmuch as there is no employer-employee relationship between a fisherman or an allied worker and an exporter, who is the last purchaser of fish in the State, the State lacks legislative competence. Section 2(a) of the Cess Act defines 'an allied worker' to be a person who is engaged mainly in fishery related activities for his livelihood and who does not come under the term W.P.(C) 30322 & 31974/2010.
4'fisherman' in clause (e) of Section 2 of the Kerala Fishermen's Welfare Societies Act, 1980 and includes beach workers, fish distributors, fish curers, peeling workers and processing plant workers, who are not members or not eligible to get membership, in any other statutory welfare scheme. As per Section 2(c), 'Board' means the Kerala Fishermen's Welfare Fund Board constituted under Section 7 of the Kerala Fishermen's Welfare Fund Act, 1985.
4. Section 2(d) of the Cess Act defines 'dealer' to mean any person who engages in the business of buying and selling of fish or processing fish or bringing into the State or sending outside the State the fish (raw or processed) or fish products or allied objects or equipments and includes
(i) a commission agent, a broker, auctioneer or any other mercantile agent; by whatever name called; and
(ii) a non-resident dealer or an agent of a non-resident dealer or a branch of a firm or company or Association W.P.(C) 30322 & 31974/2010.
5
situated outside the State. The proviso to the definition makes it clear that fishermen and allied worker as defined in the 'Welfare Fund Act' shall not be included in this.
5. Section 2(h) of the Cess Act defines 'fund' to mean the Kerala Fishermen's Welfare Fund established under Section 3 of the Welfare Fund Act.
6. Section 2(k) of the Cess Act defines 'sale proceeds' to mean the sale value of all transactions carried out in the State including buying or selling, bringing in or sending outside the State, fish or fish products or allied objects or equipments for use or for processing otherwise.
7. Section 3 of the Cess Act is the charging section that deals with the levy and collection of fees. Sub section (1) provides that, there shall be levied and collected a cess for the purpose of the Kerala Fishermen's Welfare Fund Act, 1985 and the Scheme thereunder, at one percent of the total sale proceeds of a dealer in a financial year. Sub section (4) W.P.(C) 30322 & 31974/2010.
6provides that the cess collected under the provision shall be credited initially to the consolidated fund of the State in the manner as may be prescribed. Sub Section (5) provides that the amount of cess collected shall be paid to the fund of the Board by the Government after deducting the cost of collection of such cess not exceeding one percent of the amount collected every year before 30th June in the manner as may be prescribed.
8. A comparison of the provisions of the Cess Act with the provisions of the Welfare Fund Act and the Ordinance of 2006 shows that exporters are not included within the definition of 'dealer' under the Cess Act. According to the petitioners, the legislature has consciously excluded exporters from the purview of the definition as is evident from the presence of the said words in the Ordinance and the absence thereof in the subsequent enactment. Despite the absence of any words or expressions bringing exporters within the scope W.P.(C) 30322 & 31974/2010.
7of the Act, the officers administering the Act initiated proceedings against the members of the petitioner Association and have assessed them to huge amounts of cess. Therefore, they seek a declaration that the provisions of the Act are not applicable to them.
9. If on the other hand the provisions are applicable, then such provisions are unconstitutional for the reason that the State lacks legislative competence to enact such a law. This is especially so in view of the finding of the Supreme Court that there is no employer-employee relationship between the fisherman who is the beneficiary and the exporter or nexus between the beneficiary and the exporter. The said mischief, for the presence of which the provisions of the Welfare Fund Act were set aside by the Supreme Court, still subsists rendering the provisions of the Cess Act also unconstitutional and liable to be set aside for the very same reasons.
W.P.(C) 30322 & 31974/2010.
8
10. According the Senior Counsel appearing for the petitioners, the provisions of the Cess Act are identical to the provisions of the Welfare Fund Act, particularly the objectionable sections. Section 2(d) of the Welfare Fund Act defines a 'dealer' and Section 2(i) defines the expression 'fund'. Section 2(i) defines the word 'fund' to mean the Kerala Fishermen's Welfare Fund established under Section 3 of the Act. Section 4(2) mandates that a dealer shall contribute every year to the fund, one percent of his sale proceeds in the year.
11. The Constitutional validity of Section 4(2) of the Welfare Fund Act had come up for consideration before the Apex Court in Koluthara Exports Ltd. v. State of Kerala ((2002)2 SCC 459). It was argued in the said case by the appellant who was a purchaser and exporter of fish that there was no employer-employee relationship between the appellant and the fishermen. Therefore, the legislature had no power to levy an impost by way of contribution on the appellant under W.P.(C) 30322 & 31974/2010.
9Section 4(2) of the Act, for want of legislative competence.
12. The above contention was sought to be met by the respondent, State of Kerala, contending that the Scheme was framed as a welfare measure for the benefit of the fishermen under the Welfare Fund Act, which is a welfare legislation enacted in furtherance of the Directive Principles of State policy enshrined in Articles 39 and 41 of the Constitution. The fishermen form a poor and downtrodden section of the society and therefore Entry 23 of List III of Seventh Schedule of the Constitution conferred the necessary legislative competence on the State to enact a law requiring one set of persons to pay contributions for the benefit of another set of persons.
13. After considering the rival contentions, the Apex Court found that though the State had the legislative competence under Entry 23 of List III to cast the burden of an impost by way of contribution for giving effect to the W.P.(C) 30322 & 31974/2010.
10provisions of a welfare legislation, such burden could not be imposed on a person who was not a member of such section of the society or an employer of a person, who is a member of such section of society that is to benefit from the impost. The burden of the impost could be cast only where there exists the relationship of employer and employee between the contributor and the beneficiary of the provisions of the Act and the Scheme made thereunder. Applying the above principle to the facts of the case, the Apex Court held that the relationship between an exporter and a fisherman was not that of an employer and employee. The class of fishermen is comprised of the persons who catch and sell fish while the exporters are purchasers. According to the Apex Court, b