Statutory levy and assessment required for welfare cess recovery; audit objection alone could not sustain demand letters.

Recovery of building and other construction workers' welfare cess could not rest solely on an audit objection when no levy and assessment had been undertaken under the governing statute and rules. The High Court held that the statutory mechanism had to be followed first, so the affected party could contest the applicability of the cess, including the contention that the initial contract was only for supply of equipment and material. Because the demand letters bypassed the prescribed process, they were unsustainable and were set aside, while the authority was left free to proceed afresh if the cess was otherwise applicable.

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Issues: Whether recovery of building and other construction workers' welfare cess could be sustained merely on the basis of an audit objection without levy and assessment under the governing statute.

Analysis: The impugned demand letters were founded only on the CAG audit note and were issued without first undertaking the statutory exercise of levy and assessment under the Cess Act and the rules framed thereunder. Recovery of cess had to proceed in accordance with the statutory mechanism, so that the petitioner could contest the applicability of the levy, including the objection that the first contract was only for supply of equipment and material. As the demand bypassed the prescribed statutory process, it could not be sustained.

Conclusion: The demand letters were set aside. The petitioner succeeded, and the opposite parties were left free to proceed afresh under the governing cess if the statute was found applicable.

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