TaxTMI 
TaxTMI 
2011 (8) TMI 1323
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....f the work and for remedying the defects therein. The stipulated date for completion of the work was 1st November, 2002. (c) Thereafter the work was finally completed by the Respondent/Claimant on 29th January, 2006. (d) Subsequently, disputes arose between the parties for the reason that at the time of making the final payment to the Respondent/Claimant an amount of Rs. 57,19,257/- was deducted by the Appellant/Delhi Metro Rail Corporation (DMRC) towards labour cess and an amount to the tune of Rs. 4,08,074/- was accordingly withheld. (e) In response to the protest by the Respondent/Claimant against the deductions, the Appellant/DMRC vide letter dated 28th August, 2007 conveyed to the Respondent/Claimant that the deductions were made in view of the statutory provisions of the Building and Other Construction Workers' Welfare Cess Act, 1996 (hereinafter referred to as the 'Cess Act') read with the Building and Other Construction Workers' Welfare Cess Rules, 1998 (hereinafter referred to as the 'Cess Rules') and the Building and Other Construction Workers' (Regulation of Employment and Conditions of Service) Act, 1996 (hereinafter referred to as the 'BOCW A....
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....be made at 1% of the gross amount of work done. (f) The Arbitral Tribunal unanimously ruled in favour of the Respondent/Claimant holding that the Appellant/DMRC was wrong in deducting a sum of Rs. 74,02,966/- towards labour cess from the final bill payment to be made to the Respondent/Claimant. (g) The Appellant challenged the Award before the learned Single Judge under Section 34 of the A&C Act. (h) Learned Single Judge upheld the Award of the Arbitral Tribunal stating that the Award has been correctly passed on the basis of the decision of the Division Bench in Builders Association of India (supra). Learned Single Judge further refused to interfere with the Award pointing out that the question in issue has already been dealt with by the learned Single Judge in great detail while passing the Judgment dated 7th September, 2011 in Delhi Metro Rail Corporation Limited -vs- Simplex Infrastructures Limited, OMP No. 29/2010 (resulting in FAO (OS) 674/2010). 4. On behalf of the Appellant it has been argued that the Cess Act and the Cess Rules were already in force in the whole of India since 1996 and thus the labour cess was charged by the DMRC on account of....
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....y notification in the Official Gazette, from time to time specify. (2) The cess levied under sub-section (1) shall be collected from every employer in such matter and at such time, including deduction at source in relation to a building or other construction work of a Government or of a public sector undertaking or advance collection through a local authority where an approval of such building or other construction work by such local authority is required, as may be prescribed. .............. 14. Power to make rules.- (1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act. (2) Without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (a) the manner in which and the time within which the cess shall be collected under subsection (2) of section3; (b) the rate or rates of advance cess leviable under sub-section (4) of section 3; (c) the particulars of the returns to be furnished, the officer or authority to whom or to which such returns shall be furnished and the matter and time....
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.... in respect of which the appropriate Government under the Industrial Disputes Act, 1947 (14 of 1947), is the Central Government, the Central Government; (ii) in relation to any such establishment, being a public sector undertaking, as the Central Government may by notification specify which employs building workers either directly or through a contractor, the Central Government; Explanation.- For the purpose of subclause (ii), "public sector undertaking" means any corporation established by or under any Central, State or Provincial Act or a Government Company as defined in section 617 of the Companies Act, 1956 (1 of 1956), which is owned, controlled or managed by the Central Government; (iii) in relation to any other establishment which employs building workers either directly or through a contractor, the Government of the State in which that other establishment is situate; ................. ................. (g) "contractor" means a person who undertakes to produce a given result for any establishment, other than a mere supply of goods or articles of manufacture, by the employment of building workers or who supplies building w....
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....ants and loans made to the Board by the Central Government under section 23; (b) all contributions made by the beneficiaries; (c) all sums received by the Board from such other sources as may be decided by the Central Government. (2) The Fund shall be applied for meeting- (a) expenses of the Board in the discharge of its functions under Section 22; and (b) salaries, allowances and other remuneration of the members, officers and other employees of the Board; (c) expenses on objects and for purposes authorised by this Act. (3) No Board shall, in my financial year, incur expenses towards salaries, allowances and other remuneration to its members, officers and other employees and for meeting the other administrative expenses five per cent of its total expenses during that financial year. (c) The relevant Rules under the Cess Rules read as follows: 1. Short title and commencement.- (1) These rules may be called the Building and Other Construction Workers' Welfare Cess Rules, 1998. (2) They shall come into force on the date of their publication in the Official Gazette. ____________________ ....
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....ount of cess payable on cost of construction estimated to be during one year from the date of such commencement and further payment of cess due shall be made as per the provisions of sub-rule (2). (6) Advance cess paid under sub-rules (3), (4) and (5), shall be adjusted in the final assessment made by the Assessing Officer. 8. On a plain reading of the provisions extracted above the following emerges: (a) Simultaneous with the enactment of the BOCW Act, the Parliament enacted the Cess Act as the means of generating revenues for making the welfare provisions contained in the former effective. (b) The Cess Act came into force throughout the country on the 3rd day of November, 1995. The Cess Act provided for the levy of a cess for the purposes of the BOCW Act at a rate not exceeding 2% but not less than 1% of the cost of construction incurred by the employer, as the Central Government by notification in the Official Gazette may specify. Vide Notification dated 26th September, 1996 of the Ministry of Labour the cess under the Cess Act was specified @ 1%. The Notification dated 26th September, 1996 of the Ministry of Labour reads as follows: "NO....
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....dertaking shall deduct the cess payable at the notified rate from the bills paid for such work. 9. From a conspectus of the above, it is clear that the Cess Act was made effective from the 3rd day of November, 1995. It is further clear that the BOCW Act became effective and operational from the 1st day of March, 1996 throughout the territory of India and that the Cess Rules became effective from the 26th day of March, 1998 in the said territories. In this behalf, it is observed that it is consequently crystal clear that the liability to levy cess under the Cess Act, which was a Central Act in force throughout territory of India, was not dependent on the constitution of the Welfare Boards contemplated therein. This view is supported by the decision of Single Judge of the Madras High Court in Writ Petition No.6174/2010 decided on 30^th March, 2010 reported as M.E.S. Builders' Association of India -vs- Union of India, wherein the learned Single Judge concluded that "merely because the State Government has not constituted a board will not make the petitioner builders not to pay cess as per the notified enactment", since the Cess Act was brought into force with effect from 3rd Novemb....
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....other words, the power to make a legislation imposing a tax has to be traced with reference to a specific entry in the Lists in the Seventh Schedule to the Constitution. The subject matter of the present statute is fully covered by the Entry 49 in List II (State list) pertaining to "taxes on lands and buildings" and Therefore, the Parliament lacks legislative competence to impose a tax on lands and buildings. (d) Consequently, recourse cannot be had to the residual Entry 97 of List I to justify the legislative competence of Parliament since the subject matter of the Cess Act is fully covered by any entry in the State List (List II). Reliance is placed on the judgments of the Hon'ble Supreme Court in Union of India v. H.S. Dhillon, (1972) 83 ITR 582(SC), Kunnathat Thathunni Moopil Nair v. State of Kerala, (1961) 3 SCR 77, Goodricke Group Limited v. State of West Bengal, 1995 (50) ECC 138 and State of West Bengal v. Kesoram Industries, (2004) 266 ITR 721(SC). (e) The stand of the Union of India in its counter affidavit that the subject matter of the BOCW Act is covered by Entries 23 and 24 in List III (concurrent list) is untenable. Those entries per se cannot s....
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....to ensure that such benefit reaches the workers. At present there is no such machinery. It is further suggested that since the Act itself is unworkable little purpose would be served in collecting cess at this stage. ............................ ............................. Summary of conclusions 38. (i) The subject matter of the Cess Act is the activity of building and construction, the object is to augment the Welfare Fund under the BOCW Act and the essential purpose is to benefit the building and construction worker. The 'ultimate or incidental results or consequences' might be that contractors have to part with 1% of the bill amount towards the cess. However, that does not detract from either the 'primary object' of the Cess Act or its 'essential purpose.' Applying the Hingir Rampur tests, it has to be held that the Cess Act cannot be construed to be a tax at all. (ii) It is accordingly held that the petitioners have failed to show that the subject matter of the Cess Act falls under any entry in List II or List III. Therefore the subject matter of the Cess Act is within the legislative competence of Parliamen....
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....e Bench in that decision at the delayed implementation of the welfare enactments. This allusion to the BOCW Act and the Cess Act was in the context of the Rules under Section 62 of the BOCW Act having been brought into force in Delhi only on 10th January, 2002, and the consequential delay in setting up the infrastructure and machinery and constituting the Board under the Act and setting up the Welfare Fund as was mandated under the said BOCW Act. Further, contrary to what was urged on behalf of the Respondents, in its summary of conclusions, the Division Bench came to conclusion that "the 'ultimate or incidental results or consequences' might be that contractor have to part with 1% of the bill amount towards the cess". It further concluded that "there is nothing arbitrary or unreasonable in such a classification of construction activities and the requirement of deduction of cess at source towards settlement of bills of contractors working for government departments and state agencies". Thus, this Judgment reiterates that the contractors in relation to a building or other construction works of a Government or public sector undertaking would be liable to have the cess deducted at the....
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....r any other substantive law governing the parties or is against the terms of the contract. The Supreme Court observed: "12. The question, therefore, which requires consideration is-- whether the award could be set aside, if the arbitral tribunal has not followed the mandatory procedure prescribed under Sections 24, 28 or 31(3), which affects the rights of the parties" Under Sub-section (1)(a) of Section 28 there is a mandate to the arbitral tribunal to decide the dispute in accordance with the substantive law for the time being in force in India. Admittedly, substantive law would include the Indian contract Act, the Transfer of Property Act and other such laws in force. Suppose, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, the question would -- whether such award could be set aside? Similarly, under Sub-section (3), arbitral tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If arbitral tribunal ignores the terms of the contract or usage of the trade applicable to t....
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....peatedly stated by various authorities that the expression 'public policy' does not admit of precise definition and may vary from generation to generation and from time to time. Hence, the concept 'public policy' is considered to be vague, susceptible to narrow or wider meaning depending upon the context in which it is used. Lacking precedent the Court has to give its meaning in the light and principles underlying the Arbitration Act, Contract Act and Constitutional provisions. 22. The aforesaid submission of the learned senior counsel requires to be accepted. From the judgments discussed above, it can be held that the term 'public policy of India' is required to be interpreted in the context of the jurisdiction of the Court where the validity of award is challenged before it becomes final and executable. The concept of enforcement of the award after it becomes final is different and the jurisdiction of the Court at that stage could be limited. Similar is the position with regard to the execution of a decree. It is settled law as well as it is provided under Code of civil Procedure that once the decree has attained finality, in an execution proceedi....
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....equired to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra) it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair a....