Case: Koluthara Exports Ltd Vs. State of Kerala &amp; Others

This appeal arises from the judgment and order of a Division Bench of the High Court of Kerala at Ernakulam upholding the constitutional validity of Section 4(2) read with Section 2(d) of the Kerala Fishermens Welfare Fund Act, 1985 (Act 30 of 1985) (as amended by Act 15 of 1987) (for short, the Act) in O.P. No. 19806 of 1995 and the batch by the common judgment dated August 23/23, 1996.2. On September 25, 1997 when this appeal came up for hearing before a Bench of two learned Judges of this Court, it was noticed that a Bench of three learned Judges of this Court in Gasket Radiators Pvt. Ltd. vs. Employees State Insurance Corporation & Anr. [1985 (2) SCC 68 ] had taken the view that any contribution imposed by State Legislation under Entry 23 of the Concurrent List would not amount to either tax or fee, which was relied upon by the respondent-State and that the appellant placed reliance on decisions of the Constitution Bench of this Court in The Corporation of Calcutta & Anr. vs. Liberty Cinema (AIR 1965 SC 1107 ) and M/s. Hoechst Pharmaceuticals Ltd. & Anr. vs. State of Bihar & Ors., (AIR 1983 SC 1019 . It was submitted that compulsory impost could be either by way of tax or fee and that the definition of taxation as found in Article 366 (28) of the Constitution of India and the said cases were not considered in Gasket Radiators (supra). The appeal was, therefore, referred to a Bench of three learned Judges. The Bench of three learned Judges opined that in Gasket Radiators (supra), a concept of impost in the form of compulsory contribution had been given birth to and whether such birth should further multiply was a question touching the interpretation of the Constitution and referred the appeal to a Constitution Bench of five Honble Judges. That is how this appeal has come up before us.

Court's reasoning:
In Regional Executive Kerala Fishermens Welfare Fund Board (supra), the question before this Court was whether exporters of fish meant, carrying on business of buying processed fish and exporting the same, fell within the meaning of dealer under Section 4(2) of the Act. The legislative competence of the State Legislature and the constitutional validity of Section 4(2) of the Act did not arise for the consideration of the Court in that case. That case, therefore, does not advance the case of the respondents.In the instant case, the only nexus between the categories of persons covered by the sweep of sub-section (d) of Section 2 of the Act, including the appellant, who carry on the business of buying or selling or processing fish or exporting fish (in raw or processed form) or fish products, including - (i) a commission agent, a broker or any other mercantile agent, by whatever name called, and (ii) a non-resident dealer or an agent or a non-resident dealer or a local branch of a firm or company or association situated outside the State of Kerala and the beneficiaries under the Act and the Scheme - the fishermen - is that the former are the purchasers and the latter are the catchers and sellers of fish. Such a nexus, in our view, is not sufficient to burden a purchaser /exporter with the impost or levy of the contribution under Section 4(2) of the Act, which will clearly be outside the ambit of Entry 23 of List III of the Constitution and, therefore, lacking legislative competence.For these reasons, Section 4(2) of the Act is declared to be unconstitutional.