Supreme Court of India
UTTAR PRADESH POWER TRANSMISSION CORPORATION LTD. AND ANR.versusCG POWER AND INDUSTRIAL SOLUTIONS LIMITED AND ANR.
- Citation
- 2021 INSC 294
- Decided
- 12 May 2021
- Disposal
- Dismissed
- Bench
- UDAY UMESH LALIT
Holding
UPPTCL had no power to levy or recover labour cess on the supply contract without a proper assessment, and the demand was ultra vires both the Cess Act and the contract.
Summary
Uttar Pradesh Power Transmission Corporation Ltd (UPPTCL) entered into four separate contracts with CG Power and Industrial Solutions Ltd for the construction of 765/400 KV substations, the first being a pure supply contract. After a CAG audit, UPPTCL issued letters demanding a 1% labour cess on the supply contract, withheld payments and invoked a performance guarantee, despite no assessment under the Building and Other Construction Workers’ Welfare Cess Act, 1996. The contractor challenged the demand in a writ petition; the Allahabad High Court set aside the letters, holding that cess could be levied only after proper assessment and that the supply contract fell outside the ambit of the BOCW Act. UPPTCL appealed, arguing that the High Court erred in its interpretation and that the CAG report justified the levy. The Supreme Court affirmed the High Court, stating that UPPTCL exceeded its statutory and contractual powers, that the Cess Act and Rules prescribe a specific mode of recovery, and that a supply contract is statutorily exempt from the cess. Consequently, the Supreme Court dismissed the Special Leave Petition, leaving the High Court order intact.
Issues considered
- The applicability of the Building and Other Construction Workers’ Welfare Cess Act, 1996 and its Rules to a pure supply contract.
- Whether UPPTCL had the statutory authority to levy and recover labour cess without a prior assessment under the Cess Act.
- The interpretation of the contract clauses regarding tax and cess liability and the power to withhold payments or invoke performance guarantees.
- The effect of a CAG audit report on the enforceability of cess demands absent statutory assessment.
- The jurisdiction of the High Court to entertain a writ petition involving contractual disputes under Article 226.
Legislation cited
- Building and Other Construction Workers (Regulation of Employment and Condition of Service) Act, 1996s. 2(1)(d), s. 2(1)(g), s. 2(1)(i)
- Building and Other Construction Workers Welfare Cess Act, 1996s. 3(1), s. 3(2)
- Building and Other Construction Workers Welfare Cess Rules, 1998s. Rule 3, s. Rule 4(1)-(4)
- Income Tax Act, 1961s. 192
Subjects
Building and Other Construction Workers Welfare CessBOCW ActLabour CessSupply contractArticle 226Writ petitionCAG reportContract interpretationTax levyPerformance guaranteeArbitration clauseHigh CourtSpecial Leave Petition
Judgment
[2021] 5 S.C.R. 37 37
UTTAR PRADESH POWER TRANSMISSION A
CORPORATION LTD. AND ANR.
v.
CG POWER AND INDUSTRIAL SOLUTIONS LIMITED
AND ANR.
(Special Leave Petition (C) No. 8630 of 2020) B
MAY 12, 2021
[UDAY UMESH LALIT AND INDIRA BANERJEE, JJ.]
Building and Other Construction Workers’ Welfare Cess Act,
1996: s. 3(1), (2) – Building and Other Construction Workers Welfare C
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 D
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 E
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 F
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 G
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.
H
37
38 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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
B 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.
C
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,
D 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
E 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
F 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
G 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
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 39
AND INDUSTRIAL SOLUTIONS LTD.
demanding outstanding labour cess amounting to A
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,
B
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 C
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]
D
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 E
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 F
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]
G
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
H
40 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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]
B
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]
C
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
D 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
E 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
F 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
G 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]
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 41
AND INDUSTRIAL SOLUTIONS LTD.
2.7 Cess under the Cess Act read with BOCW Act is A
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,
B
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 C
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 D
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 E
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 F
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 G
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]
H
42 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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
B
‘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
C 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
D 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
E 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
F 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]
G
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
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 43
AND INDUSTRIAL SOLUTIONS LTD.
fundamental right; (ii) where there is failure of principles of natural A
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 B
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] 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 D
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] E
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; F
Harbanslal Sahnia and Ors. v. Indian Oil Corporation
Ltd. (2003) 2 SCC 107 – referred to.
Case Law Reference
[2011] 13 SCR 214 referred to Para 49
G
[2012] 3 SCR 147 referred to Para 61
[2013] 3 SCR 508 referred to Para 61
[2013] 12 SCR 446 referred to Para 62
H
44 SUPREME COURT REPORTS [2021] 5 S.C.R.
A [1998] 2 Suppl. SCR 359 referred to Para 67
[2008] 11 SCR 980 referred to Para 67
(2003) 2 SCC 107 referred to Para 68
[2016] 5 SCR 731 distinguished Para 50
B CIVIL APPELLATE JURISDICTION : Special Leave Petition
(C) No. 8630 of 2020.
From the Judgment and Order dated 24.02.2020 of the High Court
of Judicature at Allahabad (Lucknow Bench, Lucknow) in MISC.
BENCH (M/B) No. - 125 of 2019.
C
Shishir Prakash, Ms. Karuna Krishan Thareja, Rahul Bhatia, Advs.
for the Appellants.
Ramesh Singh, Sr. Adv., Ms. Monisha Handa, Mohit D. Ram,
Advs. for the Respondents.
D The Judgment of the Court was delivered by
INDIRA BANERJEE, J.
1. This Special Leave Petition, under Article 136 of the Constitution
of India, filed by the Petitioner, hereinafter referred to as the UPPTCL,
is against a final Judgment and Order dated 24th February 2020 passed
E by the High Court of Judicature at Allahabad (Lucknow Bench), allowing
the writ petition filed by Respondent No.1 and setting aside the
lettersdated 2nd September 2016 and 29th December 2018 issued by the
Executive Engineer, Unnao UPPTCL directing the Respondent No.1 to
remit Labour Cess amounting to Rs.2,60,68,814/-, computed at 1% of
F the contract 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
G (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
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 45
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
matters connected therewith or incidental thereto. As per the Statement A
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
B
works are characterised by their inherent risk to the life and limb
of the workers. The work is also characterised by its casual nature,
temporary relationship between employer and employee, uncertain
working hours, lack of basic amenities and inadequacy of welfare
facilities.”
3. The Statement of Objects and Reasons further state “in view C
of the circumstances explained above, it has been considered
necessary to constitute Welfare Boards in every State so as to provide
and monitor social security schemes and welfare measures for the
benefit of building and other construction workers. For the said
purpose, it has been considered appropriate to bring in a D
comprehensive legislation by suitably amplifying the provisions of
the Building and Other Construction Workers (Regulation of
Employment and Conditions of Service) Bill, 1988 which was
introduced in the Rajya Sabha on the 5th December, 1988. It has
also been considered necessary to levy a cess on the cost of
construction incurred by the employers on the building and other E
construction works for ensuring sufficient funds for the Welfare
Boards to undertake the social security schemes and welfare
measures.”
4. As stated in its Statement of Objects and Reasons, the BOCW
Act, iner alia, provides for the following matters:- F
“i) provision to cover every establishment which employs or
had employed on any day of the preceding twelve months,
fifty or more workers in any building or other construction
work;
G
……..
(v) registration of establishments employing construction
workers,
(vi) registration of building workers as beneficiaries under
the said Ordinance and provision for their identity cards, etc.; H
46 SUPREME COURT REPORTS [2021] 5 S.C.R.
A (vii) constitution of Welfare Boards by the State Governments
and registration of beneficiaries under the Fund;
(viii) provide for financing and augmenting resources of the
Welfare Board constituted by the State Governments;
(ix) fixing hours for normal working day, weekly paid rest
B day, wages for over time, provision of basic welfare: amenities
like drinking water, latrines and urinals, creches, first aid,
canteens, etc., for the building workers;
(x) provision for temporary living accommodation to all
building workers within or near the work site;
C
(xi) making adequate provisions for safety and health
measures for construction workers including appointment of
safety committees and safety officers and compulsory
notification of accidents.”
D 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.
E
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
F 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 in this behalf by the appropriate
G
Government, by notification, but does not include any building or other
construction work to which the provisions of the Factories Act, 1948 (63
of 1948), or the Mines Act, 1952 (35 of 1952), apply.
7. Under Section 2(1)(e) of the BOCW Act ‘building worker’
means a person who is employed to do any skilled, semiskilled or unskilled
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 47
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
manual, supervisory, technical or clerical work for hire or reward, whether A
the terms of employment be express or implied, in connection with any
building or other construction work but does not include any such
person-
(i) who is employed mainly in a managerial or administrative
capacity; or. B
(ii) who, being employed in a supervisory capacity, draws
wages exceeding one thousand six hundred rupees per
mensem or exercises, either by the nature of the duties
attached to the office or by reason of the powers vested in
him, functions mainly of a managerial nature. C
8. Clause (b) of Section 2(1) of the BOCW Act defines
‘beneficiary’ to mean building workers, registered under Section 12 of
the said Act. ‘Contractor’, ‘employer’ and ‘establishment’ respectively
have been defined in Sections 2(1)(g), 2(1)(i) and 2(1)(j) of the BOCW
Act set out hereinbelow:- D
“(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; E
……
(i) employer”, in relation to an establishment, means the owner
thereof, and includes,-
(i) in relation to a building or other construction work carried
F
on by or under the authority of any department of the
Government, directly without any contractor, the authority
specified in this behalf, or where no authority is specified,
the head 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, G
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 though a contractor, or by the employment of building
workers supplied by a contractor, the contractor; H
48 SUPREME COURT REPORTS [2021] 5 S.C.R.
A (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
B
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:-
C
“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
D (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
E such establishment:
Provided that the registering officer may entertain any such
application after the expiry of the periods aforesaid, if he is
satisfied that the applicant was prevented by sufficient cause
from making the application within such period.
F 8. Revocation of registration in certain cases.- If the registering
officer is satisfied, either on a reference made to him in this
behalf or otherwise, that the registration of any establishment
has been obtained by misrepresentation or suppression of any
material fact or that the provisions of this Act are not being
complied with in relation to any work carried on by such
G
establishment, or that for any other reason the registration
has become useless or ineffective and, therefore, requires to
be revoked, he may, after giving an opportunity to the
employer of the establishment to be heard, revoke the
registration.
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UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 49
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
9. Appeal.-(1) Any person aggrieved by an order made under A
Section 8 may, within thirty days from the date on which the
order is communicated to him, prefer an appeal to the appellate
officer who shall be a person nominated in this behalf by the
appropriate Government:
Provided that the appellate officer may entertain the appeal B
after the expiry of the said period of thirty days if he is satisfied
that the appellant was prevented by sufficient cause from filing
the appeal in time.
xxx xxx xxx
11. Beneficiaries of the Fund.-Subject to the provisions of C
this Act, every building worker registered as a beneficiary
under this Act shall be entitled to the benefits provided by the
Board from its Fund under this Act.
12. Registration of building workers as beneficiaries.- (1)
Every building worker who has completed eighteen years of D
age, but has not completed sixty years of age, and who has
been engaged in any building or other construction work for
not less than ninety days during the preceding twelve months
shall be eligible for registration as a beneficiary under this
Act. E
xxx xxx xxx
16. Contribution of building workers.- (1) A building worker
who has been registered as a beneficiary under this Act shall,
until he attains the age of sixty years, contribute to the Fund
at such rate per mensem, as may be specified by the State F
Government, by notification in the Official Gazette and
different rates of contribution may be specified for different
classes of building workers:
Provided that the Board may, if satisfied that a beneficiary is
unable to pay his contribution due to any financial hardship, G
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. H
50 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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
B 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.
C xxx xxx xxx
22. Functions of the Boards.—(1) The Board may—
(a) provide immediate assistance to a beneficiary in case of
accident;
D (b) make payment of pension to the beneficiaries who have
completed the age of sixty years;
(c) sanction loans and advances to a beneficiary for
construction of a house not exceeding such amount and on
such terms and conditions as may be prescribed;
E (d) pay such amount in connection with premia for Group
Insurance Scheme of the beneficiaries as it may deem fit;
(e) give such financial assistance for the education of children
of the beneficiaries as may be prescribed;
(f) meet such medical expenses for treatment of major ailments
F of a beneficiary or, such dependant, as may be prescribed;
(g) make payment of maternity benefit to the female
beneficiaries; and
(h) make provision and improvement of such other welfare
G measures and facilities as may be prescribed.
xxx xxx xxx
24. Building and Other Construction Workers’ Welfare Fund
and its application.- (1) There shall be constituted by a Board
a fund to be called the Building and other Construction
H Workers’ Welfare Fund and there shall be credited thereto-
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 51
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
(a) any grants and loans made to the Board by the Central A
Government under section 23;3
(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,
B
(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 for the Board; C
(c) expenses on objects and for purposes authorised by
this Act.
(3) No Board shall, in any financial year, incur expenses
towards salaries, allowances and other remuneration to its
D
members, officers and other employees and for meeting the
other administrative expenses exceeding five percent of its
total expenses during that financial year.
xxx xxx xxx
32. Drinking water.-(1) The employer shall make in every E
place where building or other construction work is in progress,
effective arrangements to provide and maintain at suitable
points conveniently situated for all persons employed there
in, a sufficient supply of wholesome drinking water.
(2) All Such points shall be legible marked Drinking Water in F
a language understood by a majority of the person employed
in such place and no such point shall be situated within 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 G
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:
H
52 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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
B 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
C (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 room or rooms for the
D use of children under the, age of six years of such female
workers.
xxx xxx xxx
36. First-aid.—Every employer shall provide in all the places
where building or other construction work is carried on such
E first-aid facilities as may be prescribed.
xxx xxx xxx
38. Safety Committee and safety officers.—(1) In every
establishment wherein five hundred or more building workers
are ordinarily employed, the employer shall constitute a Safety
F
Committee consisting of such number of representatives of
the employer and the building workers as may be prescribed
by the State Government.
xxx xxx xxx
G 40. Power of appropriate Government to make rules for the
safety and health of building workers.—(1) The appropriate
Government may, by notification, make rules regarding the
measures to be taken for the safety and health of building
workers in the course of their employment and the 14
equipment and appliances necessary to be provided to them
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 53
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
for ensuring their safety, health and protection, during such A
employment.
(2) In particular, and without prejudice to the generality of
the foregoing power, such rules may provide for all or any of
the following matters, namely:—
41. Framing of model rules for safety measures.-The Central B
Government may, after considering the recommendation of
the expert committee constituted under section 5, frame model
rules in respect of all or any of the matters specified in section
40 and where any such model rules have been framed in
respect of any such matter, the appropriate Government shall C
while making any rules in respect of that matter under section
40, so far as is practicable, conform to such model rules.
xxx xxx xxx
46. Notice of commencement of building or other construction
work.—(1) An employer shall, at least thirty days before the D
commencement of any building or other construction work,
send or cause to be sent to the Inspector having jurisdiction
in the area where the proposed building or other construction
work is to be executed, a written notice containing—
(a) the name and situation of the place where the building or E
other construction work is proposed to be carried on;
(b) the name and address of the person who is undertaking
the building or other construction work;
(c) the address to which communications relating to the
F
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; G
(f) the number of workers likely to be employed during the
various stages of building or other construction work;
H
54 SUPREME COURT REPORTS [2021] 5 S.C.R.
A (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.
B
(2) Where any change occurs in any of the particulars
furnished under sub-section (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
C 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 only
D building and other construction workers and to make adequate provisions
for their safety, health and financial security.
11. The Cess Act has been enacted to provide for the levy and
collection of cess on the cost of construction incurred by employers,
with a view to augment the resources of the Building and Other
Construction Workers’ Welfare Boards, constituted under the BOCW
E
Act.
12. Section 3(1) of the Cess Act, which is the charging section,
provides for the levy and collection of a Cess for the purposes of the
BOCW Act, at such rate not exceeding two per cent, but not less than
one per cent, of the cost of construction incurred by an employer, as the
F
Central Government may, by notification in the Official Gazette, from
time to time specify.
13. Sub-Section (2) of Section 3 of the Cess Act provides that 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
G 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 by rules made under the
BOCW Act.
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UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 55
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
14. Sub-Section (3) of Section 3 provides that the proceeds of the A
Cess collected under Sub-Section (2) shall be paid, by the local authority
or the State Government collecting the Cess, to the Board after deducting
the cost of collection of such cess not exceeding one per cent of the
amount collected.
15. Sub-Section (4) of Section 3 of the Cess Act, contains a non B
obstante clause which makes it clear that, notwithstanding anything
contained in Sub-Section (1) or (2), the Cess leviable under the Cess
Act, including payment of such Cess in advance may, subject to final
assessment to be made, be collected at a uniform rate or rates, as may
be prescribed by the Cess Rules, on the basis of the quantum of the
building or other construction work involved. C
16. Section 4(1) requires every employer to furnish such return to
such officer or authority, in such manner and at such time as may be
prescribed. Sub-Section (2) of Section 4 provides that, if any person
carrying on the building or other construction work, liable to pay the
Cess under Section 3, fails to furnish any return under Sub-Section (1), D
the 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 E
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.
F
(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.
G
(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
H
56 SUPREME COURT REPORTS [2021] 5 S.C.R.
A Official Gazette, exempt any employer or class of employers
in a State from the payment of cess payable under this Act
where such cess is already levied and payable under any
corresponding law in force in that State.
7. Power of Entry – Any officer or authority of the State
B Government specially empowered in this behalf by that
Government may—
(a) with such assistance, if any, as he or it may think fit, enter
at any reasonable time any place where he or it considers it
necessary to enter for carrying out the purposes of this Act
C including verification of the correctness of any particulars
furnished by any employer under section 4;
(b) do within such place anything necessary for the proper
discharge of his or its duties under this Act; and
(c) exercise such other powers as may be prescribed.
D
8. Interest payable on delay in payment of cess. – If any
employer fails to pay any amount of cess payable under
section 3 within the time specified in the order of assessment,
such employer shall be liable to pay interest on the amount to
be paid at the rate of two per cent. for every month or part of
E a month comprised in the period from the date on which such
payment is due till such amount is actually paid.
9. Penalty for non-payment of cess within the specified time.—
If any amount of cess payable by any employer under Section
3 is not paid within the date specified in the order of
F assessment made under Section 5, it shall be deemed to be in
arrears and the authority prescribed in this behalf may, after
making such inquiry as it deems fit, impose on such employer
a penalty not exceeding the amount of cess:
Provided that, before imposing any such penalty, such
G employer shall be given a reasonable opportunity of being
heard and if after such hearing the said authority is satisfied
that the default was for any good and sufficient reason, no
penalty shall be imposed under this section.
10. Recovery of amount due under the Act.—Any amount due
H under this Act (including any interest or penalty) from an
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 57
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
employer may be recovered in the same manner as an arrear A
of land revenue.”
18. In exercise of power conferred by Section 14 of the Cess
Act, the Central Government has by Notification GSR 149(E) dated 26 th
March 1998 published in the Gazette of India, Extra; part 2, Section
3(1), dated 26th March 1998, enacted the Building and Other Construction B
Workers’ Welfare Cess Rules, 1998. Rules 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 C
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. D
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 finalised, whichever is earlier, to the Cess E
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 F
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 G
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 H
58 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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:
B 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).
C
(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
D 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
E further payment of cess due shall be made as per the provisions
of sub-rules (2).
(6) Advance cess paid under sub-rules (3), (4) and (5), shall
be adjusted in the final assessment made by the Assessing
Officer.
F
5. Transfer of the proceeds of the cess to the Board.—(1) The
proceeds of the cess collected under Rule 4 shall be transferred
by such Government office, Public Sector Undertakings, local
authority, or Cess Collector, to the Board along with the form
of challan prescribed (and in the head of account of the
G Board) under the accounting procedures of the State, by
whatever name they are known.
(2) Such government office or Public Sector Undertakings
may deduct from the cess collected, or claim from the Board,
as the case may be, actual collection expenses not exceeding
H one per cent of the total amount collected.
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 59
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
(3) The amount collected shall be transferred to the Board A
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. B
(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 C
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, D
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 made.
(2) The order shall inter alia, specify the amount of cess due, E
cess already paid by the employer or deducted at source and
the balance amount payable and the date, consistent with the
provision of Rule 4, by which the cess shall be paid to the
Cess Collector.
(3) If on scrutiny of information furnished, the Assessing
F
Officer is of the opinion that employer has undercalculated
or miscalculated the cost of construction or has calculated
less amount of cess payable, he shall issue notice to the
employer for assessment of the cess.
(4) On receipt of such notice the employer shall furnish to the
Assessing Officer a reply together with copies of documentary G
or other evidence in support of his claim, within fifteen days
of the receipt of the notice:
Provided that the Assessing Officer may, in the course of
assessment, afford an opportunity to the assessee to be heard
in person, if he so requests to substantiate his claim. H
60 SUPREME COURT REPORTS [2021] 5 S.C.R.
A (5) If the employer fails to furnish the reply within the period
specified under sub-rule (4), or where an employer fails to
furnish information in Form I, the Assessing Officer shall
proceed to make the assessment on the basis of available
records, and other information incidental thereto.
B (6) The Assessing Officer may, at any time while the work is
in progress, authorise such officer to make such enquiry at
the work site or from documentary evidence or in any other
manner as he may think fit for the purpose of estimating the
cost of construction as accurately as possible.
C 8. Return of overpaid cess.—(1) Where the Assessing Officer
has passed an order of assessment and the employer decides
to withdraw from or foreclose the works or modifies the plan
of construction thereby reducing the cost of construction
undertaken or has been forced by other circumstances to call
off the completion of the work undertaken, he may seek
D revision of the assessment order by making an information in
Form II to the Assessing Officer giving details of such
reduction or stoppage of work.
(2) Revision of order of assessment shall be made by the
Assessing Officer, in the same manner as the original order,
E within thirty days of receipt of such information in Form II.
(3) Following the revision of assessment as per sub-rule (2),
the Assessing Officer shall, wherever necessary, endorse 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
F ordered in the revised assessment.
(4) The Board shall, within thirty days of recepit 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
G 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.
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UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 61
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
9. Exemption.—(1) Any employer or class of employers in a 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
B
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 concerned.
(2) On receipt of such application, the Central Government
may, if it feels necessary, seek a report from the State C
Government concerned.
(3) On examining the grounds, facts and merits of such
application the Central Government may, by notification in
the Official Gazette, issue an order exempting the employer
or class of employers, as the case may be, from payment of D
cess payable under the Act where such cess is already levied
and payable under such corresponding law.
(4) Assessment proceedings shall be stopped by the Assessing
Officer for a period of thirty days commencing from the date
of the receipt of a copy of the application under sub-rule (1) E
to him, or till the order of the Central Government under sub-
rule (3) is conveyed to an employer or class of employers
who made the application under sub-rule (1), whichever is
earlier.
12. Penalty for non-payment.—(1) An Assessing Officer, if it F
appears to him that an employer has not paid the cess within
the date as specified in the assessment order or has paid less
cess, including the cess deducted at source or paid in advance,
shall issue a notice to such employer that it shall be deemed
to be in arrears and such Assessing Officer may, after such G
inquiry as it deems fit, impose on such employer, a penalty
not exceeding such amount of cess:
Provided that before imposing any such penalty, such employer
shall be given a reasonable opportunity of being heard and
if after such hearing the Assessing Officer is satisfied that
H
62 SUPREME COURT REPORTS [2021] 5 S.C.R.
A the default was for any good and sufficient reason, no penalty
shall be imposed on such employer.
13. Recovery of overdue amount.—For the purpose of
recovery of sums due on account of unpaid cess, interest for
overdue payment or, penalty under these rules, the Assessing
B Officer shall prepare a certificate signed by him, specifying
the amount due and send it to the Collector of the district
concerned who shall proceed to recover from the said
employer the amount specified thereunder as if it were an
arrear of land revenue.
C 14. Appeal.—(1) An employer aggrieved by an order of the
assessment made under Rule 7 or by an order imposing penalty
made under Rule 12 may appeal against such order, within
three months of the receipt of such order, to the Appellate
Authority.
D (2) The appeal shall be accompanied with—
(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;
E
(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.
F (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.
G (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
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 63
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
or if in his opinion the assessment was wrong or on the A
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
assessment order to the Assessing Officer along with his
observations to rectify the wrong.
B
(6) An order remanded back under sub-rule (5) shall be
disposed of by the Assessing Officer within one month in view
of the observation made by the Appellate Authority:
Provided that if the amount of cess is proposed to be enhanced
the assessee shall be given an opportunity of being heard. C
(7) No appeal shall lie against the order of the Appellate
Authority under this rule.
(8) If the Appellate Authority is of the opinion that the quantum
of penalty imposed is on the higher side or not correctly made
it shall suitably modify or set aside the order of the Assessing D
Officer, as the case may be.
(9) The appeal under this rule shall be disposed of by making
a speaking order and a copy of such order shall be sent to
each of the appellant, the Assessing Officer and the Board
within five days of the date on which such order is made. E
(10) An order in appeal reducing the amount of cess shall
also ask the Board to refund the excess cess.
(11) An order in appeal reducing, enhancing or confirming
the orders of penalty, as the case may be, shall also specify
F
the date by which the amount of penalty should be paid/
refunded.”
19. The Respondent No.1, M/s CG Power and Industrial Solutions
Limited (formerly known as M/S Crompton Greaves Limited) entered
into a Framework Agreement with UPPTCL for construction of 765/
400 KV Substations, at Unnao, Uttar Pradesh. G
20. By a letter No. 130/ESD-765/2/CGL dated 5 th March 2010,
the Superintending Engineer, UPPTCL, Unnao placed a detailed order
on the Respondent No.1 for construction of 765/400 kV Substation at
Unnao on single source responsibility turn-key basis. The scope of the
work as stated in the said letter was as follows:- H
64 SUPREME COURT REPORTS [2021] 5 S.C.R.
A “1. Scope
1.1 The scope of this contract, hereinafter called “FIRST
CONTRACT”, covers all works related to design, engineering,
manufacturing, testing at works, supply of all required equipment
and material with accessories and auxiliaries, as detailed in
B Schedule of Quantities & Prices (Annexure-IV) to sub-station
site. The scope shall also include supply of any other item necessary
for completing the scope of work without any extra cost, if not
specified in above Schedule.
1.2 The “SECOND CONTRACT” shall cover unloading, handling
C 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
D material to complete the scope for commissioning and hading over
of the entire sub-station.
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
E 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
F
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
G 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.
1.5.3 Electrical / Mechanical Auxiliaries & other Major Misc.
works
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UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 65
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
a) 2x1000kVA, 33/0/4kV Transformers A
b) D.G Set
c) Air conditioning Plant for each building
d) Lighting system for complete switchyard, buildings, streets and
stores etc. B
e) SDH communication system & PLCC communication
f)AC & DC Auxiliary Power supply system including Batteries,
Battery charges, AC & DC distribution boards
g) Fire Fighting equipment
C
h) Any other work necessary for completion of sub-station”
Sub-para 5 of the said letter under the sub-heading “Nature of
Contract” clearly provided that the work for the 765kV sub-stations on
single source responsibility, turn-key basis shall be awarded through
following four separate contracts:- D
FIRST CONTRACT “Supply and Delivery of Equipment
& Material”
SECOND CONTRACT “Handling, Erection, Testing and
Commissioning Works”
E
THIRD CONTACT “Civil Works”
FOURTH CONTRACT “Three years O & M”
21. In terms of the said Framework Agreement, the work was
split, and covered by four separate contracts. The first contract was for
design, engineering, manufacture, testing at works and supply of all F
required equipment and materials with accessories and auxiliaries, as
detailed in the said contract; the second contract covered erection, testing
and commissioning at site including unloading, handling etc.; the third
contract covered all civil works including materials for commissioning
and handing over of the Substations and the fourth contract covered
G
operations and maintenance for three years.
22. In sub-clause 5 of the said Frame Work Agreement, under the
head “Nature of Contract”, it was clearly stated that the first and second
contract shall cover all works other than civil works required to be
completed. The first contract covered supply and delivery of all equipment
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66 SUPREME COURT REPORTS [2021] 5 S.C.R.
A and materials as per schedule of prices as contained in the concerned
contract and any other item required to complete the scope of work for
completion of sub-station including their performance and guarantees;
the second contract covered unloading, handling at site, erection, testing
and commissioning of all the equipment and material supplied by the
contractor under the first contract and any other work required to complete
B
the scope for commissioning and handing over of the entire 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
C 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
D Work Agreement provided:-
“Nature of Contract
…...
The Contractor shall be fully responsible for the works to be
E 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
F 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/obligation under the
other Contracts and no time extension shall be given to the
Contractor on these grounds. The equipment/material to be
G supplied by the Contractor under the first Contract when
installed and commissioned under the second Contract shall
give satisfactory performance in accordance with provisions
of the Contract. The signing of three (3) separate Contracts
shall in no way dilute the insurance responsibility and
obligations of the Contractor.”
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 67
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
25. The total value of (i) the First Contract (Supply) was A
2750933042.00 (Two Hundred and Seventy Five Crores Nine Lakhs,
Thirty Three Thousand and Forty Two), (ii) the Second Contract
(Erection) was Rs.40129510.00 (Four Crores One Lakh, Twenty Nine
Thousand Five Hundred and Ten), (iii) the Third contract (Civil) was
Rs. 193808465.00 (Nineteen Crores Thirty Eight Lakhs Eight Thousand
B
Four Hundred and Sixty Five) and (iv) the Fourth contract (Operations
and Maintenance) was Rs.35737200.00 (Three Crores, Fifty Seven
Lakhs Thirty Seven Thousand and Two Hundred).
26. In this context, it would be appropriate to refer to Clause 6 of
the letter dated 5th March 2010, extracted hereinbelow:-
C
“6. Aggregate Contract Value
The sum of Contract values of first, second, third and fourth
Contracts for 765/400kV sub-station at Unnao shall be the
aggregate Contract value. The aggregate value of each contract
shall be as under:- D
i. Total value of First Contract Rs.275,09,33,042.00
(Supply of Equipment & Material)
ii. Total value of Second Contract Rs.4,01,29,510.00
(Handling, Erection, testing & E
commissioning Works)
iii. Total Value of Third contract Rs.19,38,08,465.00
(Civil Works)
iv. Total value of Fourth Contract Rs.3,57,37,200.00 F
(Three Years O & M)
Aggregate Value of Contract Rs.302,06,08,217.00
(Rupees three hundred two crore six lac eight thousand two
hundred seventeen only) G
27. Clause 13 provided that the contract would be governed by
the conditions given in the said letter read with:
(a) Special Conditions of Contract (Annexure-II)
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68 SUPREME COURT REPORTS [2021] 5 S.C.R.
A (b) General Conditions for supply of Plant & the Execution of
work Form-A (Annexure-III),
(c) (i) Technical specification as per volume II, III & IV,
(d) Technical Data Schedule (Guarantee technical particulars, as
per volume -V).
B
28. Clause 1 of the Special Conditions of Contract relating to
Scope of Work provided:-
“The scope of work is defined in the technical specification
No.017806-47ES-0100 and comprises engineering,
C 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.”
D 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
E following four separate contracts:-
FIRST CONTRACT “Supply and Delivery of Equipment &
Material”
SECOND CONTRACT “Handling, Erection, Testing and
F 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
G
specifications. The THIRD Contact shall cover all civil works
including required materials under its scope.
The first Contract shall cover supply and delivery of all equipments
and materials as per Schedule of Prices of respective Contract
and any other item required to complete the scope of work for
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 69
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
completion of substation including their performance and A
guarantees.
The second Contract shall cover unloading, handling at site,
erection, testing and commissioning of all the equipments and
materials to be supplied by the Contractor under first Contract
and any other work require to complete the scope for B
commissioning and handing over of the entire substation.
The third Contract shall cover all Civil Works including materials
to complete the scope for commissioning and handing over of the
entire substation.
The Contractor shall be fully responsible for timely execution of C
all the activities under above three (3) Contracts such that the
substation is commissioned and handed over within stipulated
completion period.
The Contractor shall be fully responsible for the works to be
executed under first three (3) Contracts and any breach or D
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 E
breach or default or occurrence in any of the Contracts shall not
relieve the Contractor of any of his responsibility /obligations under
the other contracts and no time extension shall be given to the
Contractor on these grounds. The equipment/material to be
supplied by the Contractor under the first Contract when installed
and commissioned under the second Contract shall give satisfactory F
performance in accordance with provisions of the Contract. The
signing of three (3) separate Contracts shalt in no way dilute the
insurance responsibility and obligations of the Contractor.
Notwithstanding executing the separate Contracts and breakup
of Contract prices the Contracts shall at all times be construed as G
a single source responsibility assignment, complete project
management, overall co-ordination between civil, electrical supply
and erection works for timely commissioning of Substation shall
be the Contractor’s responsibility.
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70 SUPREME COURT REPORTS [2021] 5 S.C.R.
A Clauses 3.2, 3.3, 3.4, 3.5 and 8.1 of the Special Conditions of
Contract is set out hereinbelow:-
SCC 3.2 Vetting of Documents
The Contractor shall bear all the charges in respect of vetting and
execution of Contract documents.
B
SCC 3.3 Aggregate Contract Vaue
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
C 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.
D
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
E 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”
shall be applicable
F
with the condition that the ’liability of delay’ shall be increased
from 10% if the transformer for the first phase of Unnao sub-
station do not reach site up to December, 2010. tn view of turn-
key nature of contract liquidated damages shall be levied only in
case of delay on contractual completion period of that phase of
G sub-station.
SCC 8.1 The prices of imported items, if any, shall be inclusive
of all taxes, duties, license fees, import/custom duties etc. legally
payable. Any such taxes, duties and levies shall be Contractor’s
account and no separate claim on this account shall be entertained
H by the Purchaser.”
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 71
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
30. Pursuant to the said First Contract (Supply Contract) the A
Respondent submitted two performance bank guarantees on 30 th August
2012, that is bank guarantee No. 2012/272 issued by Corporation Bank,
Mumbai for an amount of Rs.6092783.00 and bank guarantee No.2012/
273 also drawn on the Corporation Bank, Mumbai for an amount of
Rs.71068130/-. Respondent No.1 duly performed the first contract under
B
the framework agreement that is the contract for supply of equipment
along with accessories and auxiliaries and other related materials and
the bills raised were dulycleared.
31. Subsequently, there was an audit inspection of the 765 KV
Transmission Division, Unnao for the period from April 2012 to April
2016. The audit inspection was conducted by the Audit Officer under C
the Senior Accountant General during the period from 4th June 2016 to
9th June 2016.
32. In the Audit Report, the Accountant General pointed out the
lapse on the part of UPPTCL, in not deducting labour cess from the bills
of the contractor, that is Respondent No.1, in respect inter alia of the D
First Conract, observing that every employer was required to levy and
collect cess at a rate not exceeding 2% and not less than 1% of the cost
of construction incurred by an employer and to deposit the same with
the Building and Other Construction Workers Welfare Board.
33. By a letter No.184 dated 2nd September 2016, the Executive E
Engineer of the Petitioner, informed the Respondent No.1 of the objection
raised in the Audit Inspection Report regarding non deposit of Labour
Cess on the First Contract. It was contended that 1% Labour Cess was
to be collected from the contractor on the project cost, which would
include supply of equipment and materials as well as erection work. The F
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 G
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.
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72 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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.
B 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.
37. UPPTCL did not release the Performance Bank Guarantee
C of Rs.7 crore odd furnished by the Respondent No.1, to secure recovery
of an amount of Rs.2.6 crores towards cess. Later, the Respondent
No.1 extended the validity of the bank guarantee until 30th November,
2018, and further extended the bank guarantee till February 2019.
38. In the meanwhile, by a letter dated 1 st June 2018, the
D Superintending Engineer, UPPTCL informed the Respondent No.2
Corporation Bank that consequent upon successful performance of the
transformer and isolators supplied by the Respondent No.1, the bank
guarantees against the first (supply) contract were partly discharged as
detailed in the said letter. The Bank was instructed to retain an amount
of Rs.2,60,68,814/- from BG No. 2012/2 dated 30.8.2012 of
E Rs.7,10,68,130/- and issue an amended Bank Guarantee extending its
validity.
39. By a letter dated 29th December 2018, the Superintendent
Engineer of the UPPTCL requested the Executive Engineer, Unnao to
recover labour cess for the supply part of the composite contract from
F the pending bills of the Respondent No.1 and, in case any amount still
remained outstanding, to deduct such amount by encashment of the
Performance Bank Guarantee for Rs.2,60,68,814/- held to secure the
payment of labour cess.
40. On or about 3rd January 2019, the Respondent filed a Writ
G Petition M/B No.125 of 2019 before the Lucknow Bench of the Allahabad
High Court, challenging the said communications. In or about February
2019, while the writ petition was pending, the Executive Engineer, Unnao
purported to deposit Rs.38,38,104/- with the Building and other
Construction Workers Welfare Board (BOCWWB) as part payment
towards labour cess.
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 73
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
41. By an interim order dated 7th January 2020, the Hon’ble High A
Court restrained the UPPTCL from encashing the bank guarantee. The
question of law as to whether cess would be payable in respect of supply
of equipment by the Respondent no.1 to UPPTCL was kept open.
42. UPPTCL filed a Counter Statement to the writ petition and
the Respondent filed a Rejoinder thereto contending that the provisions B
of the BOCW Act were not applicable to the Supply Contract and levy
and deduction of labour cess in respect of the Supply Contract, was not
permissible in law. UPPTCL did not take any objection 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. C
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. D
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 E
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 F
the Cess Act of 1996 recovery could not be made pursuant to an audit
objection of CAG.
45. 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 G
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
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74 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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.
B
46. Clauses 24, 25 and 26 of the General Conditions for Supply of
Plant and Execution of Works to the UPPTCL provide as follows:-
“24.Deduction from Contract Price :- All costs, damages or
expenses, which the Purchaser may have paid, for which under
C the Contract, the Contractor is liable, may be deducted by
the purchaser from any money due or which may become due
by him to the Contractor under Contract or may be recovered
by suit or otherwise from the Contractor.
Any sum of money due and payable to the Contractor
D (including security deposit returnable to him) under this
Contract may be appropriated by the Purchaser and set off
against any claim of the Purchaser for the payment of a sum
of money arising out of or under any contract made by the
Contractor, with the Purchaser.
E 25. Terms and Payment:-21 (1) subject to deduction which
the Purchaser may be authorized to make under the Contract
or subject to any additions or deductions provided for under
Clause 12, the Contractor shall be entitled to payment as
follows:-
F (a) Eight percent of the F.O.R. Contract Value of the plant in
rupees on receipt by the Purchaser of the Contractor’s invoice
giving the number and date of railway receipt covering the
dispatch of the plant from the Indian Port and of the advise
note giving case number and contents, together with a
certificate by the Contractor to the effect that the plant detailed
G 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
H satisfactory completion of test an taking over of the plant.
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 75
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
(c) Ten percent of the F.O.R. Contract value of the plant at A
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. B
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 C
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 being made good.
If the Purchaser desires that the plant or any portion thereof D
should not be dispatched by the Contractor when it is due for
dispatch, the Contractor shall store such plant or portion at
his works and be ‘responsible’ for all risk. For such storage
the Purchaser shall pay to the Contractor at a rate to be
mutually agreed upon between the parties, but not exceeding
5s (five Shillings) per ton per week payable quarterly, plus E
interest at one percent per annum above the current rate of
the State Bank of India on 80% of the Contract value of the
plant or portion thereof so stored, for the period from the
date on which the said plant or portion becomes, due and is
ready for shipment upto the date on which it is actually F
shipped.
(A) In the event of the Supplier/Contractor/Company not being
able to supply the materials or to carry out works in
accordance with the terms of this Contract, the Government/
Purchaser/Owner shall have the right to recover any sum G
advanced in accordance with the Clause 25 from the Supplier/
Contractor/Company and from his/its assets.
26. Provisional Sums :- In any case where the Contract price
includes a provisional sum to be provided by the Contractor
for meeting the expenses of extra work or for work to be
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76 SUPREME COURT REPORTS [2021] 5 S.C.R.
A done or materials to be supplied by a sub-Contractor, such
sum shall be expended or used, either wholly or in part, or be
not used at the discretion of the Engineer and entirely as he
may decide and direct. If no part or only a part thereof be
used, then the whole or the part not used, as the case may be,
shall be deducted from the Contract price. If the sum used is
B
more than such provision, the Contractor shall pay the excess.
In the case of the materials supplied or work done by a sub-
Contractor, the total of the net sum paid to the sub-Contractor
on account of such materials or work and a sum equal to 10
% of such net sum allowed as Contractor’s profit shall be
C deemed to be sum used. None of the works or articles to which
sum of money refers shall be done or purchased without the
written order of the Engineer. The Contractor shall allow the
sub-Contractors every facility for the supply of materials or
execution, of their several works simultaneously with his own,
and shall, within fourteen days after the Engineer has
D
requested him in writing to do so, pay the dues of such sub-
Contractors on 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
E 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
F (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.
G
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 cess by revocation of a
Performance Guarantee.
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 77
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
49. In Dewan Chand Builders and Contractors vs. Union of A
India reported in (2012) 1 SCC 101, this Court examined the object of
the BOCW Act of welfare of workers engaged in building and
construction work, and held:-
“The background in which the BOCW Act was enacted, is set
out in the Statement of Objects and Reasons appended to the B
Bill preceding its enactment. To better appreciate the legislative
intent, it would be instructive to refer to the following extract
from the Statement of Objects and Reasons:
It is estimated that about 8.5. Million workers in the country
are engaged in building and other construction works. C
Building and other construction workers are one of the
most numerous and vulnerable segments of the unorganized
labour in India. The building and other construction works
are characterized by their inherent risk to the life and limb
of the workers. The work is also characterized by its casual
nature, temporary relationship between employer and D
employee, uncertain working hours, lack of basic amenities
and inadequacy of welfare facilities. In the absence of
adequate statutory provisions, the requisite information
regarding the number and nature of accidents is also not
forthcoming. In the absence of such information, it is E
difficult to fix responsibility or to take any corrective
action.
Although the provisions of certain Central Acts are
applicable to the building and other construction workers
yet a need has been felt for a comprehensive Central F
Legislation for regulating their safety, health, welfare and
other conditions of service.”
5. A fairly long preamble to the BOCW Act is again indicative
of its purpose. It reads thus:
“An Act to regulate the employment and conditions of G
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.”
H
78 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 7. The Statement of Objects and Reasons to the BOCW Act
explained that it had been considered ‘necessary to levy a
Cess on the cost of construction incurred by the employers
on the building and other construction works for ensuring
sufficient funds for tthe Welfare Boards to undertake the social
security Schemes and welfare measures.’ Simultaneously with
B
the enactment of the BOCW Act, the Parliament 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
C 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
D 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
E 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 of
F the liability on to the contractor is with a view to ensure that,
if for any reason it is not possible to collect Cess from the
owner of the building at a stage subsequent to the completion
of the construction, it can be recovered from the contractor.
The Cess Act and the Cess Rules ensure that the Cess is
collected at source from the bills of the contractors to whom
G payments are made by the owner. In short, the burden of Cess
is passed on from the owner to the contractor.
50. In Lanco Anpara Power Limited v. State of Uttar Pradesh
and Ors. Repored in (2016) 10 SCC 329, this Court held:-
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 79
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
“37. We now advert to the core issue touching upon the A
construction of Section 2(1)(d) of the BOCW Act. The argument
of the appellants is that language thereof is unambiguous
and literal construction is to be accorded to find the legislative
intent. To our mind, this submission is of no avail. Section
2(1)(d) of the BOCW Act dealing with the building or
B
construction work is in three parts. In the first part, different
activities are mentioned which are to be covered by the said
expression, namely, construction, alterations, repairs,
maintenance or demolition. Second part of the definition is
aimed at those buildings or works in relation to which the
aforesaid activities are carried out. The third part of the C
definition contains exclusion clause by stipulating that it does
not include “any building or other construction work to which
the provisions of the Factories Act, 1948 (63 of 1948), or the
Mines Act, 1952 (35 of 1952), applies”. Thus, first part of
the definition contains the nature of activity; second part
D
contains the subject-matter in relation to which the activity is
carried out and the third part excludes those building or other
construction work to which the provisions of the Factories
Act or the Mines Act apply.”
51. The clear statutory scheme of the BOCW Act excludes a
supply contract from within its ambit. On behalf of the Respondent No.1, E
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. Copies of the
KPTCL circulars dated 22.8.2012 and 28.8.2012 to this effect are annexed F
to the Rejoinder of the Respondent no.1 in the 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 G
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
H
80 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 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
B
contracts.
53. 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
C 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
D 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.
E 54. 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 which states:
“The contract shall be a ‘Divisible Contract’ with single point
F responsibility, hence no works Contract tax shall be payable
and the Purchaser shall not bear any liability on this
account.”
55. Mr. Ramesh Singh appearing on behalf of the Respondent
No.1 submitted and rightly, that the four contracts had been treated as a
G 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.
56. Mr. Singh pointed out that as per the terms of payment under
Clause 9.1 of the Special Conditions of Contract, the Schedule of
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 81
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
Payments were separate for the supply and delivery of equipment and A
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.
57. Mr. Singh argued 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 B
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.
58. As argued by Mr. Singh, the judgment of this Court in Lanco
Anpara Power Limited v. State of Uttar Pradesh and Other reported C
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. D
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 E
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 F
impermissible for UPPTCL to issue the impugned communication to
realize cess solely on the basis of the report of the CAG.
61. In Centre of Public Litigation v. Union of India reported in
(2012) 3 SCC 1, this Court held that when CAG report was subject to
scrutiny of the Public Accounts Committee and the Joint Parliamentary G
Committee, it would not be proper to refer to to findings and conclusions
contained therein. In this context, reference may also be made to the
decision of this Court in Arun Kumar Agrawal v. Union of India and
Others reported in (2013) 7SCC 1, where this Court held:-
H
82 SUPREME COURT REPORTS [2021] 5 S.C.R.
A “56. CAG may be right in pointing out that public monies are
to be applied for the purposes prescribed by Parliament and
that extravagance and waste are minimised and that sound
financial practices are encouraged in estimating and
contracting, and in administration generally.
B xxx xxx xxx
67. The question that is germane for consideration in this
case is whether this Court can grant reliefs by merely placing
reliance on the CAG’s Report. The CAG’s Report is always
subject to parliamentary debates and it is possible that PAC
C can accept the ministry’s objection to the CAG Report or reject
the report of the CAG. The CAG, indisputably is an
independent constitutional functionary, however, it is for
Parliament to decide whether after receiving the report i.e.
PAC to make its comments on the CAG’s Report.”
D 62. In Pathan Mohammed Suleman Rehmatkhan v. State of
Gujarat and Others reported in (2014) 4 SCC 156, this Court held:-
“9. We heard Shri Y.N. Oza, the learned counsel for the
petitioner and perused the records, as well as counter-affidavit
and reply-affidavit filed by the parties before the Gujarat
E High Court. The entire case of the petitioner is based on the
CAG report. The applicability and the binding characteristics
of such report were considered by the High Court. In Arun
Kumar Agrawal case [Arun Kumar Agrawal v. Union of India,
(2013) 7 SCC 1] this Court held as follows: (SCC p. 24, para
68)
F
“68. We may, however, point out that since the report is from
a constitutional functionary, it commands respect and cannot
be brushed aside as such, but it is equally important to examine
the comments what respective Ministries have to offer on the
CAG’s report. The Ministry can always point out, if there is
G any mistake in the CAG’s report or the CAG has
inappropriately appreciated the various issues.”
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
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 83
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
authorities or other bodies had used their resources in A
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
B
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 C
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 may go wrong and sometimes
D
they may achieve the desired results. Criticisms are always
welcome in a parliamentary democracy, but a decision taken
in good faith, with good intentions, without any extraneous
considerations, cannot be belittled, even if that decision was
ultimately proved to be wrong.
xxx xxx xxx E
12. Reference in this regard may also be made to the judgment
of this Court in Centre for Public Interest Litigation v. Union
of India [(2012) 3 SCC 1 : AIR 2012 SC 3725] , wherein it
was held that when the CAG report is subject to scrutiny by
the Public Accounts Committee and the Joint Parliamentary F
Committee, it would not be proper to refer to the findings and
conclusions contained therein. The Court even went on to
say that it is not necessary to advert to the reasoning and
suggestions made, as well.”
63. In this Case, there is apparently no dispute, difference or G
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, H
84 SUPREME COURT REPORTS [2021] 5 S.C.R.
A specifications or drawings or any of them. UPPTCL has changed its
stand only after the CAG report. Cess in respect of of the First Contract
has been deducted only in view of the audit objection raised by the Office
of Comptroller and Auditor General (CAG).
64. The initial stand of UPPTCL will appear from the relevant
B portion of the CAG report reproduced hereinbelow:-
“Management stated in its reply that the labour cess from
supply bills has not been deducted because there was not
involvement of labour in supply of material whereas labour
cess has been deducted from the erection bill. Reply is not
C tenable as labour cess will be deducted from the cost of
construction wherein supply of material and erection of work
were also included.
[Emphasis Supplied]”
65. It is true that the General Conditions contain an Arbitration
D Clause which is set out hereinbelow:-
“Arbitration :- If any dispute, difference or controversy shall
at any time arise between the Contractor on the one hand
and the U.P. Power Transmission Corporation Limited and
the Engineer of the contract on the other hand, the contract,
E or as to 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
F 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
G 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
H
UTTAR PRADESH POWER TRANSMISSION CORP. LTD. v. CG POWER 85
AND INDUSTRIAL SOLUTIONS LTD. [INDIRA BANERJEE, J.]
nominated by him in this behalf and his decision in writing A
shall be final, binding and conclusive. This submission shall
be deemed to a submission on arbitration within the meaning
of the Indian Arbitration Act, 1940 or any statutory
modification thereof The Arbitrator may from time to time with
consent of the parties enlarge the time for making and
B
publishing the award.
Upon every or any such reference, the cost of an incidental
to the reference and award respectively shall be in the
discretion of the arbitrator, who shall be competent to
determine the amount thereof or direct the same to be taxed
as between solicitor and clients or as between party and party C
and to direct by whom and to whom and in what manner the
same shall be borne and paid.
Work under the contract shall, if reasonably, possible,
continued during the Arbitration proceedings and no
payments due to payable by the UPPTCL shall be withheld D
on account of such proceeding. In case refusal/neglect by
such nominee Chairman, UPPTCL may nominate another
person in his place.”
66. Even though there is an arbitration clause, the Petitioner herein
has not opposed the writ petition on the ground of existence of an E
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.
67. It is well settled that availability of an alternative remedy does F
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 G
impugned orders or proceedings are wholly without jurisdiction or (iv)
the vires of an Act is under challenge. Reference may be made to
Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and
Ors. reported in AIR 1999 SC 22 and Pimpri Chinchwad Municipal
Corporation and Ors. V. Gayatri Construction Company and Ors,
reported in (2008) 8 SCC 172, cited on behalf of Respondent No.1. H
86 SUPREME COURT REPORTS [2021] 5 S.C.R.
A 68. In Harbanslal Sahnia and Ors. v. Indian Oil Corporation
Ltd. reported in (2003) 2 SCC 107, this Court allowed the appeal from
an order of the High Court dismissing a writ petition and set aside the
impugned judgment of the High Court as also the impugned order of the
Indian Oil Corporation terminating the dealership of the Appellants,
notwithstanding the fact that the dealership agreement contained an
B
arbitration clause.
69. It is now well settled by a plethora of decisions of this Court
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
C 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.
70. In this case, the action of UPPTCL in forcibly extracting building
cess from the Respondent No.1 in respect of the first contract, solely on
D 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
Cess Act in respect of the first contract by withholding dues in respect
of other contracts and/or invoking a performance guarantee. There is
E 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.
71. Even otherwise, the Cess Act and/or statutory rules framed
thereunder prescribe the mode and manner of recovery of outstanding
F 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.
72. In our considered opinion, the judgment and order of the High
G Court impugned does not call for inference under Article 136 of the
Constitution of India. The Special Leave Petition is, therefore, dismissed.
Nidhi Jain Special Leave Petition dismissed.
H
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