THE HON’BLE SRI JUSTICE S.V.BHATT WRIT PETITION NO.24838 OF 2009 Between:-
M/s. MRKR –ZVS Consortium Rep.by its authorized signatory, 8-2-268/1/DA. Plot No.7, Aurora Colony, Road No.3, Banjara Hills, Hyderabad.
…Petitioner.
And Govt. of Andhra Pradesh rep.by the Principal Secretary, Finance and Planning (Works & Projects), A.P. Secretariat, Saifabad, Hyderabad and others.
…Respondents.
THE HON’BLE SRI JUSTICE S.V.BHATT WRIT PETITION NO.24838 OF 2009 ORDER:
The issue arises under The Building and Other Construction Workers Welfare Cess Act, 1996 (for short “the Act”).
The grievance of the petitioner in implementation of the provisions of the Act is two fold; namely imposition of 1% Labour Cess on the contract value without including such component in the estimates and recovering the same as illegal and arbitrary; and secondly, the levy and collection of cess is contrary to Sections 3 and 4 of the Act read with Rules 3, 4, 7 and 8 and amounts to arbitrary exercise of power.
The averments in brief are as follows:- On 26-02-2009, the petitioner and respondents entered into agreement No.20/2008-09 for execution of Investigation, Design and execution of Eastern Main Canal from 44.625 KM to 146.190 KM including construction of en-route tunnels, formation of Peddireddipalli Reservoir, excavation of Udayagiri Branch Canal and provide canals for E6, E7 and E8 Blocks of Eastern Main Canal including CM & CD works and its distributory system to create irrigation potential for 2,50,000 acres in upland areas of Prakasam and Nellore Districts (for short “the works”).
The relevant clauses which have bearing on the disposal of the writ petition are as follows:-
“Clause 106.0 :– Labour Welfare Cess: Labour Welfare Cess at 1% has to be paid by the successful bidder and the same is to be recovered from the bills during execution.
Clause (o):- The Building and Other Construction workers (regulation of Employment and conditions of Service) Act 1996 and the Cess Act, 1996: All the establishments who carry on any building or other construction work and employs 10 or more workers are covered under this Act. All such establishments are required to pay cess at the rate not exceeding 2% of the cost of construction as may be modified by the Government. The Department of the establishment is required to provide safety measures at the Building or construction work and other welfare measures, such as Canteens, First-aid facilities, ambulance, Housing accommodations for workers near the work place etc. The Department to whom the Act applies has to obtain a registration certificate from the Registering Officer appointed by the Government.
Clause 13.6:- All duties, taxes and other levies payable by the contractor as per State/Central Government rules, shall be included in the contract value quoted by the Bidder.”
The petitioner in great detail refers to the scheme and object of the Act, scope of Rules 3, 4 and 7 of the Rules and contends that the flat recovery of 1% Cess on the value of agreement from the recurring bills is arbitrary and illegal and further contends that in the case on hand, the component of Labour Cess is not included in the estimates.
The respondents filed counter and oppose the maintainability of writ petition, explain the circumstances of lawful levy of Labour Cess. The counter refers to the clauses and the scope of operation of those clauses. It is contended that once the agreement has clauses for recovery of Labour Cess, the petitioner cannot complain the same. Secondly, the petitioner cannot claim exemption from the applicable laws in executing the agreement.
The binding agreement between the parties specifies the obligation to pay the statutory levies by the contractor. To persuade this Court, the learned counsel for the petitioner contends that this Court has taken the view that if the Labour Cess is not included as one of the components in the estimates prepared by the department, recovery of the same is illegal.
I have perused the order passed by this Court. The said order is distinguishable inasmuch as in the case on hand, the agreement governing the relationship between the parties has not only specified the duties and obligations of contractor, but also specified the methodology for implementation of such obligations. I am afraid, contrary to the agreed term/clause, this Court cannot issue a writ of mandamus to the respondents in the manner prayed for by the petitioner.
It is to be noted that the discharge of statutory duty/obligation is not dependent on the volition of a party or clause in the agreement. Even if a clause provides for exempting implementation of a statutory obligation, the same is hit by Section 28 of the Contract Act. This Court is not examining the legality of clauses covered by the said agreement. It is suffice to observe that the parties are executing the work under the subject agreement and are certainly bound by the clauses. As the petitioner admits that there is a clause in the agreement for payment of Labour Cess, in the opinion of this Court, the absence of Labour Cess component in the estimates is unconstitutional. The petitioner cannot unilaterally change or restrict the scope of operation of an agreed clause in the agreement. Further a writ for such a purpose is not maintainable. Therefore, I am unable to agree with the first submission of the learned counsel for the petitioner that recovery of cess without including the Labour Cess component in the estimates is illegal and arbitrary.
The other submission of the learned counsel is on the levy and recovery of Labour Cess on the total value of contract by the department without taking note of applicable exclusions in arriving at the value attracting liability of Labour Cess. While elaborating the submission, it is further stated that Section 4 of the Act provides alternatives on the mode and manner of payment of Labour Cess to the employer and the amount payable towards Labour Cess cannot be arrived at in an abstract manner and the department must also follow the vigor of the Act. By way of illustration, it is contended that rule 3 provides for exclusion of cost of land. Rule 7 provides for assessment and there is also further facility in the rule for reducing the cost of project and paying Labour Cess proportionately.
The respondents tried to justify the levy of Labour Cess at 1% on the recurring bills by referring to agreement clauses. This objection of the petitioner in the opinion of the Court does not come within the purview of total illegal exercise of jurisdiction, but comes within the scope of parameters applicable for levy of Labour Cess. This is a matter for consideration and decision by the department/assessing authority under the Act. The same cannot be pre-judged by this Court in disposing of the writ petition. This aspect requires consideration of various elements/facts and figures submitted by the petitioner while conforming to the obligations under the Act.
With a view to ensuring proper implementation of the object of the Act and simultaneously to prevent undue hardship to the petitioner, I consider it appropriate to permit the petitioner to file a representation before the 4th respondent within a period of six weeks from today and on receipt of such representation, the 4th respondent considers the same in the light of the scheme of the Act and passes appropriate order on the representation for proper implementation of the clause in the agreement as well. It is needless to observe that the decision of 4th respondent is subject to further orders under Section 7 of the Act by the assessing officer on the information/returns submitted by the petitioner in statutory forms.
With the above observation, the writ petition is disposed of. Till the 4th respondent takes a decision on the representation of the petitioner, the interim order granted by this Court on 17-11-2009 shall be in force. The 4th respondent shall also consider and dispose of the representation strictly in accordance with the provisions of the Act. No order as to costs. The Miscellaneous Petitions pending if any shall stand closed.
S.V.BHATT,J Date: 20-08-2014 Shr.
THE HON’BLE SRI JUSTICE S.V.BHATT WRIT PETITION NO.24838 OF 2009 Date: 20-08-2014 Shr.