TaxTMI 
TaxTMI 
2021 (5) TMI 1076
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.... value, under Sections 3 sub-section (1) and (2) of the Building and Other Construction Workers' Welfare Cess Act, 1996, hereinafter referred to as the "Cess Act", read with Rules 3 and Rule 4 (1), (2) (3) and (4) of the Building and Other Construction Workers Welfare Cess Rules, 1998, hereinafter referred to as the "Cess Rules" and also Section 2 (1)(d), (g) and (i) of the Building and Other Construction Workers (Regulation of Employment and Condition of Service) Act, 1996, hereinafter referred to as the "BOCW Act". 2. The BOCW Act has been enacted to regulate the employment and conditions of service of building and other construction workers and to provide for their safety, health and welfare measures and for other matters connected therewith or incidental thereto. As per the Statement of Objects and Reasons for the BOCW Act, "it is estimated that about 8.5 million workers in the country are engaged in building and other construction works. Building and other construction workers are one of the most numerous and vulnerable segments of the unorganised labour in India. The building and other construction works are characterised by their inherent risk to the life and limb of the ....
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....pulsory notification of accidents." 5. The Statement of Objects and Reasons reveals that the necessity to enact BOCW Act arose from the necessity to levy cess on the cost of construction incurred by the employers on a building and on other construction works, in order to generate funds for the Welfare Boards to enable such Welfare Boards to undertake social security schemes and welfare measures for building and construction workers. 6. Section 2(1)(d) of the BOCW Act defines "building or other construction work" to mean the construction, alteration, repairs, maintenance or demolition of or, in relation to, buildings, streets, roads, railways, tramways, airfields, irrigation, drainage, embankment and navigation works, flood control works (including storm water drainage works), generation, transmission and distribution of power, water works (including channels for distribution of water), oil and gas installations, electric lines, wireless, radio; television, telephone, telegraph and overseas communication dams, canals, reservoirs, watercourses, tunnels, bridges, viaducts, aquaducts, pipelines, towers, cooling towers, transmission towers and such other work as may be specified i....
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....ans any establishment belonging to, or under the control of, Government, any body corporate or firm, an individual or association or other body of individuals which or who employs building workers in any building or other construction work; and includes an establishment belonging to a contractor, but does not include an individual who employs such workers in any building or construction work in relation to his own residence the total cost of such construction not being more than rupees ten lakhs" 9. Some of the relevant provisions of the BOCW Act are set out hereunder:- "7. Registration of establishments.- (1) Every employer shall,- (a) in relation to an establishment to which this Act applies on its commencement, within a period of sixty days from such commencement; and (b) in relation to any other establishment to which this Act may be applicable at any time after such commencement, within a period of sixty days from the date on which this Act becomes applicable to such establishment, make an application to the registering officer for the registration of such establishment: Provided that the registering officer may entertain any such applica....
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....isfied that a beneficiary is unable to pay his contribution due to any financial hardship, waive the payment of contribution for a period not exceeding three months at a time. (2) A beneficiary may authorise his employer to deduct his contribution from his monthly wages and to remit the same, within fifteen days front such deduction, to the Board. 17. Effect of non-payment of contribution.- When a beneficiary has not paid his contribution under sub-section (1) of section 16 for a continuous period of not less than one year, he shall cease to be a beneficiary: Provided that if the Secretary of the Board is satisfied that the non-payment of contribution was for a reasonable ground and that the building worker is willing to deposit the arrears, he may allow the building worker to deposit the contribution in arrears and on such deposit being made, the registration of building worker shall stand restored. xxx xxx xxx 22. Functions of the Boards.-(1) The Board may- (a) provide immediate assistance to a beneficiary in case of accident; (b) make payment of pension to the beneficiaries who have completed the age of sixty years; ....
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....hin six metres of any washing place, Urinal or latrine. 33. Latrines and urinals.- In every place where building or other construction work is carried on, the employer shall provide sufficient latrine and urinal accommodation of such types as may be prescribed and they shall be so conveniently situated as may be accessible to the building workers at all times while they are in such place: Provided that it shall not be necessary to provide separate urinals in my place where less than fifty persons are employed or where the latrines are connected to a water-borne sewage system. 34. Accommodation.- (1) The employer shall provide, free of charges and within the work site or as near to it as may be possible temporary living accommodation to all building workers employed by him for such period as the building or other construction work is in progress. (2) The temporary accommodation provided under sub-section (1) shall have separate cooking place bathing, washing and lavatory facilities 35. Creches.- (1) In every place where in more them fifty female building workers are ordinarily employed, there shall be provided and maintained, a suitable r....
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....unications relating to the building or other construction work may be sent; (d) the nature of the work involved and the facilities, including any plant and machinery, provided; (e) the arrangements for the storage of explosives, if any, to be used in the building or other construction work; (f) the number of workers likely to be employed during the various stages of building or other construction work; (g) the name and designation of the person who will be in overall charge of the building or other construction work at the site; (h) the approximate duration of the work; (i) such other matters as may be prescribed. (2) Where any change occurs in any of the particulars furnished under subsection (1), the employer shall intimate the change to the Inspector within two days of such change. (3) Nothing contained in sub-section (1) shall apply in case of such class of building or other construction work as the appropriate Government may by notification specify to be emergent works." 10. A perusal of the various provisions of the BOCW Act makes it amply clear that the said Act has been enacted for the welfare of onl....
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....he officer or the authority shall give a notice requiring such person to furnish such return before such date as may be specified in the notice. 17. Sections 5, 6, 7, 8, 9 and 10 of the Cess Act provide:- "5. Assessment of cess.-(1) The officer or authority to whom or to which the return has been furnished under Section 4 shall, after making or causing to be made such inquiry as he or it thinks fit and after satisfying himself or itself that the particulars stated in the return are correct, by order, assess the amount of cess payable by the employer. (2) If the return has not been furnished to the officer or authority under sub-section (2) of Section 4, he or it shall, after making or causing to be made such inquiry as he or it thinks fit, by order, assess the amount of cess payable by the employer. (3) An order of assessment made under sub-section (1) or sub-section (2) shall specify the date within which the cess shall be paid by the employer. 6. Power to exempt.-Notwithstanding anything contained in this Act, the Central Government may, by notification in the Official Gazette, exempt any employer or class of employers in a State from the pa....
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....les 3, 4, 5, 6, 7, 8, 9, 12, 13 and 14 of the Cess Rules, provide: "3. Levy of cess.- For the purpose of levy of cess under sub-section (1) of Section 3 of the Act, cost of construction shall include all expenditure incurred by an employer in connection with the building or other construction work but shall not include- - cost of land; - any compensation paid or payable to a worker or his kin under the Workmen's Compensation Act, 1923. 4. Time and manner of collection.- (1) The cess levied under subsection (1) of Section 3 of the Act shall be paid by an employer, within thirty days of completion of the construction project or within thirty days of the date on which assessment of cess payable is finalised, whichever is earlier, to the Cess Collector. (2) Notwithstanding the provisions of sub-rule (1), where the duration of the project or construction work exceeds one year, cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period. (3) Notwithstanding the provisions of sub-....
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....ing one per cent of the total amount collected. (3) The amount collected shall be transferred to the Board within thirty days of its collection. 6. Information to be furnished by the employer.- (1) Every employer, within thirty days of commencement of his work of payment of cess, as the case may be, furnish to the Assessing Officer, information in Form I. (2) Any change or modification in the information furnished under sub-rule (1) shall be communicated to the Assessing Officer immediately but not later than thirty days from the date of affecting the modification or change. 7. Assessment.- (1) The Assessing Officer, on receipt of information in Form I from an employer shall make a scrutiny of such information furnished and, if he is satisfied about the correctness of the particulars so furnished, he shall make an order of assessment within a period not exceeding six months from the date of receipt of such information in Form I, indicating the amount of cess payable by the employer and endorse a copy thereof to the employer, to the Board and to the Cess Collector and despatch such order within five days of the date on which such order is....
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....a copy of the revised assessment to the Board or Cess Collector, as the case may be, for making the refund of excess cess as ordered in the revised assessment. (4) The Board shall, within thirty days of receipt of the endorsement from the Assessing Officer under sub-rule (3), refund the amount specified in the order to the employer through a demand draft payable at the station where the establishment is located. (5) Where the Appellate Authority has modified the order of assessment reducing the amount of cess, refund shall be made within such time as may be specified in that order. 9. Exemption.-(1) Any employer or class of employers in a State seeking exemption under Section 6 of the Act may make an application to the Director-General of Labour Welfare, Ministry of Labour, Government of India, stating the details of works undertaken, names of the Act or corresponding law in force in that State under which he is liable to pay cess for the welfare of the construction workers and amount of cess actually paid along with the date of such payment and proof thereof. A copy of such application shall be endorsed to each of the Assessing Officer and the board conc....
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....a) the order appealed against; (b) a certificate from the Cess Collector to the effect that the amount of cess or penalty or both, as the case may be, relating to such appeal has been deposited; (c) a fee equivalent to one per cent of the amount in dispute or penalty or both, as the case may be, under such appeal; (d) a statement of points in dispute; (e) documentary evidence relied upon. (3) On receipt of the appeal the Appellate Authority may call from the Assessing Officer a statement on the basis of his assessment order appealed against, as such Appellate Authority may consider necessary for the disposal of such appeal. (4) The Appellate Authority shall give the appellant an opportunity of being heard in the matter and dispose of the appeal as expeditiously as possible. (5) On being satisfied on the quantum of cess the Appellate Authority shall confirm the order of the Assessing Officer or if in his opinion the assessment was wrong or on the higher side shall modify the order of assessment or if in his opinion the assessment is on the lower side or if the basis of assessment is wrong, it shall remand back the assess....
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....loading, handling at site, erection, testing and commissioning of all the equipment and material to be supplied by the contractor under first contract and any other work require to complete the scope for commissioning and handing over the entire sub-station. 1.3 the "THIRD CONTRACT" shall cover all civil works including material to complete the scope for commissioning and handing over of the entire substation. 1.4 The proposed sub-station shall be constructed as per scope of work (Doc. No. 017806-47ES-0100) under the technical specification (Volume-II) and the specification drawings enclosed with the REP document. 1.5 The proposed sub-station will be comprised of following works: 1.5.1 765kV switchyard (one & a half breaker scheme) a) Two (2), 765kV feeder bays along-with 1x330MVAR shunt reactor in each bay b) Two (2), 765kV bays for 2x1000MVA Tranformer Bank c) One (1), 765kV bay for 189MVAR Bus Reactor Bank d) 3 nos. spare 765kV bays 1.5.2 400kV switchyard is to be modified to accommodate Two (2), 400kV bays of 2x1000MVA, 765/400kV Transformer Bank in Double Main & Transformer Bus arrangement. ....
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.... sub-station. The third contract would cover all civil works including required materials under its scope. 23. Four separate contracts were executed by and between UPPTCL and the Respondent No. 1. There can be no doubt that cess under the Cess Act is payable in respect of the Third Contract, which covers all civil works. The first and second contracts, which cover all works other than civil works, and do not involve any construction, do not attract cess under the Cess Act. 24. The penultimate paragraph of Clause 5 of the said Frame Work Agreement provided:- "Nature of Contract ...... The Contractor shall be fully responsible for the works to be executed under first three (3) Contracts and any breach or occurrence or default under one Contract shall automatically be deemed as a breach or occurrence or default of other Contracts, giving the Engineer absolute right to take appropriate action under any/all the Contracts including right to recover damages from any/all the Contracts or terminate any/all the Contracts. Any such breach or default or occurrence in any of the Contracts shall not relieve the Contractor of any of his responsibility/obligat....
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.... Contract relating to Scope of Work provided:- "The scope of work is defined in the technical specification No. 017806- 47ES-0100 and comprises engineering, procurement and construction of 765/400 kV sub-station at Unnao on a turn-key basis. The substation includes four (4) separate Contracts which are defined in Clause 3.1 of the Special Conditions of Contract." 29. Clause 3 of the Special Conditions of Contract relating to Nature of Contracts specifically provides:- "SCC 3 Nature of Contract SCC 3.1 The work for the above 765kV sub-stations on single source responsibility, turn-key basis shall be awarded through following four separate contracts:- FIRST CONTRACT "Supply and Delivery of Equipment & Material" SECOND CONTRACT "Handling, Erection, Testing and Commissioning Works" THIRD CONTACT "Civil Works" FOURTH CONTRACT "Three years O & M" The first and second Contracts shall cover all works, other than civil works, required to complete total scope under these specifications. The THIRD Contact shall cover all civil works including required materials under its scope. The first Contract shall cover....
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....out hereinbelow:- SCC 3.2 Vetting of Documents The Contractor shall bear all the charges in respect of vetting and execution of Contract documents. SCC 3.3 Aggregate Contract Value The sum of Contract Values of first, second, third and fourth Contracts shall be the aggregate Contract value. The limits for quantity variation and penalties for delays shall be 10% of the respective Contract value as under: SCC 3.4 Quantity Variation The quantities of individual works under any of the above Contracts may very to any extent; however the total value of such variations shall not exceed the 10% of the concerned Contract value. Such variations in quantities/work, under any of the above Contracts, upto 10% of the concerned Contract value shall be allowed by concerned Engineer of Contract. However if such variation is likely to exceed 10% of the Contract value of any Contract, the variation shall be allowed by concerned Engineer of Contract after taking prior concurrence of competent authority. SCC 3.5 Liquidated Damages for Delays in Completion Period Damages for delay in completion under clause 32 of Form "A" s....
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....ude supply of equipment and materials as well as erection work. The Respondent No. 1 was also informed that simple interest was chargeable on Labour Cess at the rate of 2% per month. 34. By a letter dated 14th September 2016, the Respondent objected to the imposition of Labour Cess computed at 1% of the total cost of construction, stating that for the purposes of the first contract, the company was not covered under the definition of contractor under the Act. Thereafter, by a letter dated 27th September 2016, the UPPTCL advised the Respondent No. 1 to seek opinion of the Labour Commissioner on the applicability of Labour Cess. 35. By a letter dated 14th November 2016, the Respondent No. 1 sought the opinion of the Labour Commissioner on the applicability of Labour Cess on the cost of supply of equipment and materials, contending that Labour Cess was not payable under the Cess Act or the BOCW Act on supply of equipment and materials. 36. The Respondents also made representations to the UPPTCL for setting aside the demand for cess alleged to be outstanding, on the ground that the first contract was exempted from cess under the BOCW Act and the Cess Act 1996. ....
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....ection to the maintainability of the writ petition on the ground of existence of an alternative remedy, as is evident from its Counter Statement/Affidavit filed in the High Court. 43. By the impugned order dated 24th February 2020, the High Court set aside the letters dated 2nd September, 2016 and 29th December, 2018 sent by the Petitioner to the Respondent demanding outstanding labour cess amounting to Rs. 2,60,68,814/- computed at the rate of 1% of the contract value. 44. The High Court accepted the submission of the Respondent No. 1 that in the absence of levy and assessment under the Cess Act 1996 and the Rules made thereunder, the letters of the UPPTCL were not sustainable in law. Cess could only be recovered in the manner stipulated in the Cess Act and the Rules framed thereunder. The High Court observed that if cess were leviable under the Cess Act, it would be necessary for the concerned authorities to undertake the exercise of assessment and levy of cess under the Cess Act of 1996 as amended, before the same could be realized from a contractor. The High Court found that in the absence of any order for levy and assessment under the Cess Act of 1996 recovery ....
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....to the effect that the plant detailed in the said advise note has actually been dispatched under the said railway receipt and that the Contract value of the said plaint so dispatched is not less than the amount entered in the invoice. (b)Ten percent of the F.O.R. Contract value of the plant on satisfactory completion of test an taking over of the plant. (c)Ten percent of the F.O.R. Contract value of the plant at the end of Twelve months from the date of taking over. (d)For the erection of the plant and proportion of the progress of the work on the receipt by the Purchaser of monthly invoices submitted by the Contract supported by the certificates of the Engineer. If at the time at which either of the instalments due under sub-clause (b) and (c) of Clause (1) hereof become payable there are minor defects in the plant which are not of such importance as to affect the full commercial use of the plant then the Purchaser shall be entitled to retain only such part of the instalment then due as represents the cost of making good such minor defects and any sum so retained shall, subject to the provisions of Clause 36, become due upon such minor defects b....
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.... account of such materials or work: PROVIDED ALWAYS that the Contractor shall have no responsibility with regard to such works or articles unless he shall have previously approved the sub-Contractor and\or the material or plant to be supplied." 47. It is nobody's case that Respondent No. 1 has committed any breach or default in performance of the First Contract, that is, the Supply Contract, rendering it liable for any damages, costs or expenses. The Respondent No. 1 duly discharged its obligations under the First Contract (Supply Contract) to the satisfaction of UPPTCL, and accordingly all payments due to it were cleared. The Performance Guarantees furnished by the Respondent No. 1 were also partially discharged except to the extent of covering cess on the First (Supply) contract. This is apparent from the communication of the UPPTCL dated 1st June 2018 to the Bank (Respondent No. 2), referred to above. 48. As observed above, Clause 8 of the Special Conditions of the Contract merely says that duties, taxes, fees etc. as are legally applicable, shall be paid at actuals by the contractor. This clause does not enable UPPTCL to withhold payments or to realize....
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....liament enacted the Cess Act. The Statement of Objects and Reasons to the Cess Act noted that the intention was to 'provide for the levy and collection of a Cess on the cost of construction incurred by the employers for augmenting the resources of the Building and Other Construction Workers' Welfare Boards constituted by the State Governments under the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Ordinance, 1995.' 8. It is manifest from the overarching schemes of the BOCW Act, the Cess Act, the Rules made thereunder that their sole object is to regulate the employment and conditions of service of building and other construction workers, traditionally exploited sections in the society and to provide for their safety, health and other welfare measures. The BOCW Act and the Cess Act break new ground in that, the liability to pay Cess falls not only on the owner of a building or establishment, but under Section 2(i)(iii) of the BOCW Act 'in relation to a building or other construction work carried on by or through a contractor, or by the employment of building workers supplied by a contractor, the contractor.' The extension o....
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....e High Court. 52. Under Section 2(g) of the BOCW Act the term '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 workers for any work of the establishment and includes a sub-contractor. The Respondent No. 1 is apparently not a contractor, within the meaning of Section 2(1)(g) of the BOCW Act in respect of the first, second and fourth contracts. Nor is the Respondent No. 1 employer within the meaning of Section 2(1)(i) of the BOCW Act. Section 2(1)(i) of the BOCW Act defines 'employer' to include the contractor in relation to a building and other construction work carried on by or through a contractor or by employment of building workers supplied by a contractor. The Respondent No. 1 neither falls within the definition of 'contractor in Section 2(1)(g) nor 2(1)(i)(iii) of the BOCW Act. Apparently, the Respondent No. 1 is not liable to cess in respect of the First, Second and Fourth contracts. 53. Cess under the Cess Act read with BOCW Act is leviable in respect of building and other constructio....
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....s argued by Mr. Singh, the judgment of this Court in Lanco Anpara Power Limited v. State of Uttar Pradesh and Other reported in (2016) 10 SCC 329 cited on behalf of UPPTCL is of no assistance to UPPTCL since the issues of whether cess under the Cess Act was leviable on a Supply Contract or whether the cost of construction under Section 3 of the Cess Act read with Rule 3 of the Cess Rules included the cost of supply of equipment were not adjudicated in the aforesaid case. 59. There can be no comparison between realization of disputed cess by withholding the bills raised by the Respondent No. 1 or by invocation of a bank guarantee furnished by the Respondent No. 1 after release of payment to the Respondent No. 1, and deduction of Income Tax at source which is a statutory obligation of any person making a payment which constitutes 'income' under Section 192 of the Income Tax Act, 1961. 60. As observed above, UPPTCL demanded and partly realized cess on the supply Contract, solely on the basis of report of the CAG. In our considered view, in the absence of any adjudication, it was impermissible for UPPTCL to issue the impugned communication to realize cess solely on....
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....ues." 10. The CAG is a key figure in the system of parliamentary control of finance and is empowered to delve into the economy, efficiency and effectiveness with which the departmental authorities or other bodies had used their resources in discharging their functions. The CAG is also the final audit authority and is a part of the machinery through which the legislature enforces the regulatory and economy in the administration of public finance, as has been rightly pointed out by the High Court. But we cannot lose sight of the fact that it is the Government which administers and runs the State, which is accountable to the people. The State's welfare, progress, requirements and needs of the people are better answered by the State, also as to how the resources are to be utilised for achieving various objectives. If every decision taken by the State is tested by a microscopic and a suspicious eye, the administration will come to a standstill and the decision-makers will lose all their initiative and enthusiasm. At hindsight, it is easy to comment upon or criticise the action of the decision-maker. Sometimes, decisions taken by the State or its administrative authorities m....
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....o the true construction meaning and intent of any part or condition of, the same or as to the manner of execution or as to the quality or description of, or payment for the same, or as to the true intent, meaning, interpretation, construction or effect of the clauses of Contract, specifications or drawings or any of them, or as to anything to be done, committed or suffered in pursuance of the contract, or specification or as to the mode of carrying the contract into effect, or as to the breach of alleged breach of the contract, or as to any claims on account of such breach or alleged breach or as to obviating or compensating for the commission of any such breach, or as to any other matter or thing whatsoever connected with or arising out of the contract and whether before or during the progress of after the completion of the contract, such question difference of dispute shall be referred for adjudication to the Chairman, U.P. Power Transmission Corporation Limited or to any other person nominated by him in this behalf and his decision in writing shall be final, binding and conclusive. This submission shall be deemed to a submission on arbitration within the meaning of the Indian Ar....