Building and Other Construction Workers’ Welfare Cess Act, 1996: s. 3(1), (2) – Building and Other Construction Workers Welfare Cess Rules, 1998 – rr. 3 and 4 (1)-(4) – Building and Other Construction Workers (Regulation of Employment and Condition of Service) Act, 1996 – s. 2 (1)(d), (g) and (i) – Levy of cess on cost of construction incurred by builders – Respondent no. 1-contractor entered into an agreement with UPPTCL for construction of 765/
400 KV Substations, split into four contracts – Dispute between parties – Issuance of letters by UPPTCL directing respondent no.1 to remit Labour Cess computed at 1% of the contract – UPPTCL demanded cess on the supply Contract, on the basis of report of the CAG – Writ petition by respondent no. 1 – High Court allowed the petition, setting aside the letters – Interference with – Held: Not called for – Cess under the Cess Act read with BOCW Act is leviable in respect of building and other construction works – Scheme of BOCW Act excludes supply contract from its ambit – Action of UPPTCL in forcibly extracting building cess from respondent no.1 in respect of the first contract, solely on the basis of the CAG report, is in excess of power conferred on UPPTCL, when there was admittedly no assessment or levy of cess under the Cess Act – UPPTCL has no power and authority and or jurisdiction to realize labour cess under the Cess Act in respect of the first contract by withholding dues in respect of other contracts and/or invoking a performance guarantee – Furthermore, the Cess Act and/or statutory rules framed thereunder prescribe the mode and manner of recovery of outstanding cess under the Cess Act – UPPTCL could not have taken recourse to the methods adopted by it – Thus, the communications rightly set aside.
Building and Other Construction Workers’ Welfare Cess Act, 1996: Elucidation of.
Constitution of India: Art. 226 – Contractual matters – Scope of interference by High Court – Held: Availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case – Relief u/Art.226 may be granted in a case arising out of contract – However, the writ jurisdiction u/Art.226 being discretionary, the High Courts usually refrain from entertaining a writ petition which involves adjudication of disputed questions of fact which may require analysis of evidence of witnesses – Monetary relief can also be granted in a writ petition. Dismissing the Special Leave Petition, the Court
HELD: 1. In the instant case, the action of UPPTCL in forcibly extracting building cess from the Respondent No.1 in respect of the first contract, solely on the basis of the CAG report, is in excess of power conferred on UPPTCL by law or in terms of the contract. In other words, UPPTCL has no power and authority and or jurisdiction to realize labour cess under the Building and Other Construction Workers’ Welfare Cess Act, 1996 in respect of the first contract by withholding dues in respect of other contracts and/or invoking a performance guarantee. There is no legal infirmity in the finding of the High Court that UPPTCL acted in excess of power by its acts impugned, when there was admittedly no assessment or levy of cess under the Cess Act. Even otherwise, the Cess Act and/or statutory rules framed thereunder prescribe the mode and manner of recovery of outstanding cess under the Cess Act. It is well settled that when statute requires a thing to be done in a particular manner, it is to be done in that manner alone. UPPTCL could not have taken recourse to the methods adopted by it. The impugned communications have rightly been set aside. The judgment and order of the High Court impugned does not call for inference under Article 136 of the Constitution of India. [Paras 70-72] [86-D-G]
2.1 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. The High Court accepted the submission of the Respondent No.1 that in the absence of levy and assessment under the Building and Other Construction Workers’ Welfare Cess Act, 1996 and Building and Other Construction Workers Welfare Cess Rules, 1998, 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 could not be made pursuant to an audit objection of CAG. [Paras 43-44][73-C-F]
2.2 There does not appear to be any provision in the first contract, second contract, third contract, or fourth contract or in the Special Conditions of Contract or the General Conditions for Supply of Plant and the Execution of work which enables UPPTCL to withhold any amount from the bills raised by the Respondent No.1 on UPPTCL towards any taxes, cess or any other statutory dues of the contractor. Nor has the UPPTCL adverted to any specific provision of the contract which enables UPPTCL to do so. Clause 8.1 of the Special Conditions of Contract relied upon by UPPTCL reads that the prices of imported items, if any, shall be inclusive of all taxes, duties, licence fees, import/customs duties etc. legally payable. Any such taxes, duties levies shall be on Contractor’s account and no separate claim on the Account shall be entertained by the purchaser. This clause does not authorize UPPTCL to deduct taxes etc. from bills. [Para 45] [73-F-H; 74-A-B]
2.3 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). [Para 47][76-E-G]
2.4 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 cess by revocation of a Performance Guarantee. [Para 48][76-G-H]
2.5 The clear statutory scheme of the BOCW Act excludes a supply contract from within its ambit. On behalf of the Respondent No.1, it is pointed out that several public authorities and corporations, such as the Delhi Metro Rail Corporation and Karnataka Power Transmission Corporation Limited, have issued instructions that no cess under the BOCW Act is leviable on a contract for supply of goods. [Para 51][79-E-F]
2.6 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 w orkers 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. [Para 52][79-F-H; 80-A-B]
2.7 Cess under the Cess Act read with BOCW Act is leviable in respect of building and other construction works. The condition precedent for imposition of cess under the Cess Act is the construction, repair, demolition or maintenance of and/or in relation to a building or any other work of construction, transmission towers, in relation inter alia to generation, transmission and distribution of power, electric lines, pipelines etc. Mere installation and/or erection of pipelines, equipments for generation or transmission or distribution of power, electric wires, transmission towers etc. which do not involve construction work are not amenable to Cess under the Cess Act. Accordingly no intimation or information was given or any return filed with the Assessing Officer under the Cess Act or the Inspector under the BOCW Act in respect of the First and Second Contracts, either by UPPTCL or by the Respondent No.1. [Para 53][80-B-E]
2.8 A contractor who enters into a pure Supply Contract is statutorily exempted from levy under the BOCW Act. The Contract in question is a Supply Contract as would be evident from Clause 8.7 of the Special Conditions of Contract. [Para 54][80-E-F]
2.9 Respondent No.1 rightly submitted that the four contracts had been treated as a singular contract solely for the purposes of responsibility for timely execution. For all other intents and purposes, including levy of any tax or fees, the contract for supply was understood by the parties as a separate and distinct contract. As per the terms of payment under Clause 9.1 of the Special Conditions of Contract, the Schedule of Payments were separate for the supply and delivery of equipment and materials, totaling to Rs.275,09,33,042.00 as against the total value of the contract which is Rs.302,06,08,217.00. It was submitted that the terms and clauses of the contract made it amply clear that the first contract was for supply and delivery of equipment and materials. It was a pure supply contract, separate and distinct from civil works contract. The UPPTCL itself understood the Cess Act as not applicable to the Supply Contract and accordingly did not deduct cess from the invoices/bills of the Respondent. [Paras 55-57][80-G-H; 81-A-B]
2.10 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. [Para 59][81-D-E]
2.11 UPPTCL demanded and partly realized cess on the supply Contract, solely on the basis of report of the CAG. In the absence of any adjudication, it was impermissible for UPPTCL to issue the impugned communication to realize cess solely on the basis of the report of the CAG. [Para 60][81-F]
2.12 In the instant case, there is apparently no dispute, difference or controversy between UPPTCL and the Respondent No.1 as to the true construction, meaning or intent of any part of the conditions of contract or to the manner of execution or the quality or description or payment for the same. Nor is there any dispute as to the true meaning, intent, interpretation, construction or effect of the clauses of contract, specifications or drawings or any of them. UPPTCL has changed its stand only after the CAG report. Cess in respect of the First Contract has been deducted only in view of the audit objection raised by the Office of Comptroller and Auditor General (CAG). [Para 63][83-G-H; 84-A]
2.13 Even though there is an arbitration clause, the Petitioner has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High Court. In any case, the existence of an arbitration clause does not debar the court from entertaining a writ petition. [Para 66][85-E]
3.1 It is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. The High Court may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (1) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge. [Para 67][85-F-G]
3.2 It is now well settled that relief under Article 226 of the Constitution of India may be granted in a case arising out of contract. However, the writ jurisdiction under Article 226, being discretionary, the High Courts usually refrain from entertaining a writ petition which involves adjudication of disputed questions of fact which may require analysis of evidence of witnesses. Monetary relief can also be granted in a writ petition. [Para 69] [86-C]
Lanco Anpara Power Limited v. State of Uttar Pradesh and Ors. (2016) 10 SCC 329:[2016] 5 SCR 731 – distinguished
Dewan Chand Builders and Contractors vs. Union of India (2012) 1 SCC 101 : [2011] 13 SCR 214; Centre of Public Litigation v. Union of India (2012) 3 SCC 1 : [2012] 3 SCR 147; Arun Kumar Agrawal v. Union of India and Others (2013) 7 SCC 1 : [2013] 3 SCR 508; Pathan Mohammed Suleman Rehmatkhan v. State of Gujarat and Others (2014) 4 SCC 156 : [2013]
12 SCR 446; Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. AIR 1999 SC 22 : [1998] 2 Suppl. SCR 359; Pimpri Chinchwad Municipal Corporation and Ors. v. Gayatri Construction Company and Ors (2008) 8 SCC 172 : [2008] 11 SCR 980; Harbanslal Sahnia and Ors. v. Indian Oil Corporation Ltd. (2003) 2 SCC 107 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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