UPPTCL cannot demand labour cess from suppliers under BOCW Act without proper statutory assessment procedures

The SC dismissed a special leave petition challenging the HC's decision that set aside UPPTCL's demand for labour cess under the Building and Other Construction Workers Welfare Cess Act, 1996. The HC correctly held that supply contracts fall outside the BOCW Act's ambit, and UPPTCL lacked authority to realize cess by withholding payments or invoking performance guarantees without proper assessment under the statutory scheme. The respondent supplier was neither a contractor nor employer within the Act's definitions. UPPTCL's action based solely on CAG report recommendations, without following prescribed procedures, was deemed excessive and unlawful.

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Issues Involved:
1. Applicability of the Building and Other Construction Workers’ Welfare Cess Act, 1996 (Cess Act) to supply contracts.
2. Legality of recovering cess based on the Comptroller and Auditor General (CAG) report without proper assessment.
3. Jurisdiction of the High Court in entertaining a writ petition despite the existence of an arbitration clause and alternative remedies.

Issue-Wise Detailed Analysis:

1. Applicability of the Cess Act to Supply Contracts:
The Supreme Court examined whether the Cess Act, which aims to levy and collect cess on the cost of construction for the welfare of building and other construction workers, applies to supply contracts. The Court noted that the Cess Act and the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) are intended to benefit construction workers by collecting funds from construction activities. The Court highlighted that the BOCW Act defines "building or other construction work" and "contractor" in a way that excludes mere supply of goods. The Court found that the first and second contracts, which involved supply and delivery of equipment and materials, did not involve construction work and thus did not attract cess under the Cess Act.

2. Legality of Recovering Cess Based on the CAG Report:
The Court addressed the issue of whether cess could be recovered based solely on the CAG report without proper assessment and levy under the Cess Act. The Court emphasized that cess could only be recovered following the procedures stipulated in the Cess Act and the rules framed thereunder. The Court found that the UPPTCL's demand for cess based on the CAG report, without any formal assessment or levy, was not permissible. The Court cited previous judgments, including Dewan Chand Builders and Contractors vs. Union of India and Lanco Anpara Power Limited v. State of Uttar Pradesh, to reinforce that the Cess Act's provisions must be strictly followed for cess recovery.

3. Jurisdiction of the High Court Despite Arbitration Clause and Alternative Remedies:
The Court examined whether the High Court could entertain a writ petition despite the existence of an arbitration clause and alternative remedies. The Court noted that the UPPTCL did not raise any objection to the maintainability of the writ petition based on the arbitration clause in its counter-affidavit. The Court reiterated that the availability of an alternative remedy does not bar the High Court from exercising its writ jurisdiction in appropriate cases, especially where fundamental rights are involved, principles of natural justice are violated, or the impugned orders are without jurisdiction. The Court cited several precedents, including Whirlpool Corporation v. Registrar of Trade Marks and Harbanslal Sahnia v. Indian Oil Corporation Ltd., to support its decision.

Conclusion:
The Supreme Court upheld the High Court's judgment, setting aside the UPPTCL's demand for cess on the supply contract. The Court found that the Cess Act did not apply to the supply contract, and the UPPTCL's actions based on the CAG report were not legally sustainable. The Court also affirmed the High Court's jurisdiction to entertain the writ petition despite the existence of an arbitration clause and alternative remedies. The Special Leave Petition was dismissed.

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