Construction welfare cess cannot be recovered on a pure supply contract without statutory assessment and collection procedure.

The Building and Other Construction Workers' Welfare Cess Act, 1996 applies to building and other construction work, not to a pure supply contract merely because it is part of a larger turnkey arrangement. The statutory levy, assessment, collection and recovery of cess must follow the prescribed mechanism under the Act and Rules; unilateral recovery by withholding bills, invoking a performance guarantee, or relying only on an audit objection is outside the employer's authority. Cess on the supply component therefore cannot be demanded without prior statutory assessment, and recovery must proceed only through the statutory process.

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Issues: Whether labour cess under the Building and Other Construction Workers' Welfare Cess Act, 1996 was leviable on the supply contract for equipment and materials, and whether the employer could recover such cess by withholding bills or invoking the performance guarantee without assessment under the statute.

Analysis: The statutory scheme of the welfare legislation is confined to building and other construction work and to persons answerable as contractor or employer in that context. A pure supply contract, distinct from civil construction, does not itself amount to building or other construction work merely because it forms part of a larger turnkey arrangement. The Act and the Rules prescribe a specific machinery for levy, assessment, collection and recovery of cess, and recovery cannot be undertaken by unilateral contractual action or solely on the basis of an audit objection. A demand for cess on the supply portion, without prior statutory assessment, was therefore outside the employer's authority.

Conclusion: Labour cess was not recoverable on the supply contract in the manner adopted, and the challenge to the impugned demand failed.

Final Conclusion: The statutory levy was held inapplicable to the pure supply component, and recovery could proceed only through the prescribed assessment and collection process under the welfare cess regime.

Ratio Decidendi: Cess under the Building and Other Construction Workers' Welfare Cess Act, 1996 can be recovered only in accordance with the statutory assessment and collection mechanism, and a pure supply contract is not taxable as building or other construction work merely because it is connected with a larger project.

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