IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF FEBRUARY 2019 BEFORE THE HON’BLE MR. JUSTICE H. T. NARENDRA PRASAD WRIT PETITION No.33177/2013(GM-RES) BETWEEN: R.N.PARAMESHWARAPPA S/O NINGAPPA, AGE 45 YEARS ENGINEER & CLASS-I, PWD CONTRACTOR NO.1653/4, 4TH CROSS, SIDDAVEERAPPA LAYOUT DAVANAGERE-577 004.
... PETITIONER (BY SRI.N. BASAVARAJAIAH, ADV.) AND 1. THE STATE OF KARNATAKA DEPARTMENT OF WATER RESOURCES REP: BY ITS SECRETARY VIKAS SOUDHA BANGALORE-56001.
2. THE SUPERINTENDENT ENGINEER INCHARGE & EVALUATION DEPARTMENT 3RD FLOOR, BASAVA BHAVANA BASAVESHWARA ROAD BANGALORE-560001.
3. THE EXECUTIVE ENGINEER KARNATAKA NEERAVARI NIGAMA. LTD., NO.5, BHADRA CANAL DVN. HADADI ROAD DAVANAGERE-577 005.
... RESPONDENTS (BY SMT.NILOUFER AKBAR, AGA. FOR R1 & R2 SRI.M.R.C. RAVI, ADV. FOR R3) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE RESPONDENTS NOT TO DEDUCT THE LABOUR WELFARE CESS FROM THE BILLS OF THE PETITIONER UNLESS IT IS INCLUDED IN THE ESTIMATE OF THE WORK OR IN THE TENDER NOTIFICATION & ETC.
THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R In this writ petition, the petitioner is seeking for a direction to the respondents not to deduct the Labour Welfare Cess from the bills of the petitioner unless it is included in the estimate of the work or in the tender notification and further to direct the respondents to refund the Labour Welfare Cess which is already collected from the bills of the petitioner as per Annexures-H, J and K.
2. The petitioner is a Class-I Civil Contractor.
He has undertaken construction work in respondent’s departments. As per the provisions of the Building and Other Construction Workers’ Welfare Cess Act, 1996 (for short “the Cess Act”), the respondents have collected the cess from the bills of the petitioner. Being aggrieved by the same, the petitioner has approached this Court.
3. Sri.Basavarajaiah, the learned counsel for the petitioner submits that as per the provisions of Section 3(2) of the Cess Act, the respondents have to collect the cess from the employer and not from the petitioner-contractor. He further contented that as per the provisions of Section 3(2) of the Cess Act and Government Order vide Annexure-R1 and corrigendum dated 28.2.2007, cess has to be deducted at the time of approval of construction work. If the cess is not deducted, it cannot be in the running bill. Hence, he sought for allowing the petition.
4. Per contra, the learned counsel for the respondents submits that definition of the “employer” has to be read as defined under Section 2(i) of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (for short “the Act”). As per the said definition, the contractor is also an employer. He further submits that as per Section 3(2) of the Cess Act, it is very clear that the respondent can collect cess at any stage including deduction at source in relation to a building or other construction work of a Government or of a public undertaking or advance collection through a local authority. In support of his contention, he has relied upon the Government Order No.LD 300 LET 2006 dated 18.1.2007, which reads as under:
“In the light of the decision taken by the Government to enforce the provisions of the Building and Other Construction Workers Welfare Cess Act, 1996, it is ordered that:-
a) All Government Departments, public sector undertakings and other governmental agencies/bodies carrying out any building or other construction works which are covered under Section 2(d) of the main Act shall, in case the work is carried out through a Contractor deduct 1% of the amount of the cost approved as per the tender notification from the bill at the time of making payment to the contractors and such amount so deducted from the contractors’ bill shall be remitted by way of account payee cheque in favour of then Karnataka State Building and Other Construction Workers’ Welfare Board within 30 days of making such payment along with a forwarding letter addressed to the Secretary-cum-Chief Executive Officer, Karnataka State Building and other Construction Workers’ Welfare Board, 3rth Stage, Karmika Bhavan, Bannerghatta Road, Bangalore-29.”
5. Heard the learned counsel for the parties and perused the records.
6. Section 3(2) of the Building and Other Construction Workers’ Welfare Cess Act, 1996 is relevant and same is extracted hereunder:
3. Levy and collection of cess: (1) XXX (2) The cess levied under sub-section (1) shall be collected from every employer in such manner 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.”
Section 2(d) of the Cess Act reads as under:
2. Definitions: XXXX (d) words and expressions used herein but not defined and defined in the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 shall have the meanings respectively assigned to them in the Act.
The expression “employer” has been defined under Section 2(i) of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, which reads thus:
2(i) "employer" in relation to an establishment, means the owner thereof, and includes,---
(i) in relation to a building or other construction work carried on by or under the authority of any department of the Government, directly without any contractor, the authority specified in this behalf, or where on authority is specified, the hear of the department;
(ii) in relation to a building or other construction work carried on by or on behalf of a local authority or other establishment, directly without any contractor, the chief executive officer of that authority or establishment;
(iii) 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;
Section 2(g) of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 defines the word “contractor” as under:
2(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 workers for any work of the establishment; and includes a sub- contractor;
Section 2(j) of the Act, 1996 defines the word “establishment” as under:
2(j) “establishment” means 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.”
7. In view of the above provisions and definitions, it is clear that the contractor shall be the employer in respect of establishment wherein he has been awarded contract work. Therefore, the contention of the petitioner that the petitioner- contractor is not an employer, cannot be accepted.
8. In respect of the contention of the learned counsel for the petitioner that cess has to be deducted at the time of approval of construction work, if it is not deducted, it cannot be in the running bills. It is very clear from the provisions of Section 3(2) of the Cess Act that cess levied under sub-section (1) shall be collected from every employer in such manner 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.
9. From the language of sub-section 2 of Section 3 of the Cess Act, it is clear that cess has to be levied under sub-section (1) and has to be collected from every employer in such manner 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. The word ‘or’ clearly denotes that advance collection through a local authority where an approval of such building or other construction work by such local authority is required to be read disjunctively and they cannot be read in conjunctions with the earlier part of the Section where the word ‘or’ has been used repeatedly.
10. Rule 4 of the Building and Other Construction Workers’ Welfare Cess Rules, 1998 reads as hereinbelow:
“4. Time and manner of collection -
(1) The cess levied under sub-section (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 finalized, 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-rule (1) and sub-rule (2), where the levy of cess pertains to building and other construction work of a Government or of a Public Sector Undertaking, such Government or the Public Sector Undertaking shall deduct or cause to be deducted the cess payable at the notified rates from the bills paid for such works.
(4) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the approval of a construction work by a local authority is required, every application for such approval shall be accompanied by a crossed demand draft in favour of the Board and payable at the station at which the Board is located for an amount of cess payable at the notified rates on the estimated cost of construction;
Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on cost of construction estimated to be incurred during one year from the date of commencement and further payments of cess due shall be made as per the provisions of sub-rule (2).
(5) An employer may pay in advance an amount of cess calculated on the basis of the estimated cost of construction along with the notice of commencement of work under section 46 of the Main Act by a crossed demand draft in favour of the Board and payable at the station at which the Board is located:
Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on cost of construction estimated to be incurred 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.”
11. The Act is a social welfare legislation. The aforesaid Act and Rules have been enacted with an object to provide for relief to the workers engaged in the unorganized sector of construction. By reading the above provisions of Act and Rules, it is clear that where the cess levied under Section 3(1) of the Act was not collected by the local authority at the time of approval of construction work which pertains to the Government or a Public Sector Undertaking, such Government or Public Sector Undertaking can deduct the cess amount from the bill at the time of making payment to the contractor.
12. Therefore, the contention of the learned counsel for petitioner that cess cannot be deducted in the running bill cannot be accepted.
13. Hence the writ petition is devoid of merit.
Accordingly, writ petition is dismissed.
No order as to costs.
Sd/- JUDGE DM