Tripura High Court
Bhartia Infra Projects Limited vs The Union Of India & Ors on 17 January, 2022
Bench: Indrajit Mahanty, S.G. Chattopadhyay
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HIGH COURT OF TRIPURA
AGARTALA
W.P(C) No. 1123 of 2016
Bhartia Infra Projects Limited
............Petitioner(s)
Versus
The Union of India & Ors.
............Respondent(s)
For Petitioner(s) : Mr. Soumendu Roy, Advocate.
For Respondent(s) : Mr. A. De, Advocate.
HON'BLE THE CHIEF JUSTICE MR. INDRAJIT MAHANTY HON'BLE MR. JUSTICE S.G. CHATTOPADHYAY Order 17/01/2022 Heard learned counsel for the parties.
The learned counsel for the petitioner submitted that the present writ petition relates to challenge of levy of labour cess on Schedule-D supplies. He draws our attention to Clause 43.1 which is quoted hereunder:
"43.1. The tenderer/contractor for carrying out any construction work in Assam State must get themselves registered from the Registering Officer under Section-7 of the Building and Other Construction Workers Act, 1996 and rules made thereto by the Assam State Government and submit certificate of Registration issued from the Registering Officer of the State Government (Labour Department). For enactment of this Act, the tenderer shall be required to pay cess @1% of cost of construction work to be deducted from each bill. Cost of material shall be outside the purview of cess, when supplied under a separate schedule item."
He further draws our attention to Schedule-D to the agreement entered into by the parties which is as follows:
Page - 2 of 6 Sl. NS Item Description of work Unit Qnty. Rate Amount (Rs.) No. (Rs.)
1. - Supplying and stacking of granular Cum 97500 3912.00 381420000.00 materials on the top of widened/new formation with contractor own labour, materials, transport, equipment and machinery etc. inclusive of all taxes and royalty charges with all lead, lift and descent complete in all respects as per specification and also including extra quantity for voids. The granular materials should be of approved quality conforming to RDSO's specification and guidelines for blanketing materials. "If required, blending of two or more materials available locally is to be done to attain the specified grade ratio of grain sizes or quality as required and detail in RDSO's guidelines for Earthwork in railway projects, July-2003. (Payment for mechanical compaction will be made separately," no deduction in quantity shall be made on account of shrinkage."
Placing reliance on the Clause 43.1 as well as Schedule-D, learned counsel for the petitioner submits that the respondent railways ought not to have deducted 1% labour cess from the supplies effected by the petitioner pursuant to Schedule-D to the agreement. Learned counsel also drew our attention to paragraph 7 of the counter affidavit filed by the railway which reads as under:
"7. That, as per terms & condition of the contract, the contractor shall be obliged the Building and other construction workers Act, 1996 under clause-43.00 and as per provision therein, the Cess shall be levied and collected @1% of the cost of construction incurred by an employer i.e. by contractor wherein the N.F. Page - 3 of 6 Railway shall be known as Principal employer. For enactment of such act, the said levied amount to be deducted from each bill. However, cost of materials shall be outside the purview of cess when supplied under a separate schedule item. In accordance, Cess is being levied time to time during making payment of the Bill. But, the Contractor being aggrieved with the recovery made by the Railway as per terms and condition of the agreement, filed the writ Petition in question with an appeal that the Railway may restrain from such recovery of cess @ 1% from the each running bill with the plea that the item of work under schedule D was regarding supply of granular materials and deduction on account of Labour cess is wholly bad in Law of Land and contrary to the provisions of Building and Other construction worker' Welfare Cess Act, 1996. So far the rate of NS (Non-Schedule) item as was incorporated under SL No-1 of Schedule-D vide page 12 (Annexure-1) of the contract agreement is concerned, the scope of work in this item was not only on supply based but also of labour oriented and therefore, Labour Cess @ 1% is chargeable invariably. The involvement of labour was also clearly mentioned in the nomenclature of the item. The description of work and derivation of rate therein are also based on detailed specification & guidelines of work as well as analysis of rate of such item of work in question. Therefore, there may not be any ambiguity to simply affirm that being exclusively of supply item; no cess shall be recovered as per applicability. Photo copy of the relevant pages of the contract agreement is annexed herewith and is marked as ANNEXURE-1."
In view of the aforesaid submission, learned counsel for the petitioner asserts that the petitioner effected supplies under a separate Schedule to the agreement and consequently the respondent railways had no authority to effect deduction of labour cess from its bills.
Learned counsel appearing for the railways on the other hand contended that the petitioner was obliged to pay labour cess on all the supplies effected pursuant to its agreement with the railways and the deduction effected by the railways was strictly in accordance with law.
Page - 4 of 6 It would be important at this stage to take note of what was the obligation cast upon the petitioner under Schedule-D to the agreement which is extracted herein above.
From the description of work provided in Schedule-D, it is clear that job of the petitioner was confined to supply and stacking of granular materials on the top of widened/new formation with contractors' own labour materials, transport, equipment and machinery etc. Counsel appearing for the petitioner contends that the petitioner was, thus, merely required to supply the granular materials and upon effectuating the said supply for enabling the railway authorities to measure the supplied quantity, the petitioner was required to stack the granular materials supplied in the manner aforesaid. Counsel contends that being a mere supplier of goods or articles of manufacture by employing workers, petitioner cannot be termed as a contractor under section 2(1)(g) of the Buildings and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (for short BOCW Act). Counsel contends that for the Schedule-D work, petitioner entered into a pure supply contract which is statutorily exempted from levy of cess under the BOCW Act. Petitioner argued that several public authorities and corporations such as Delhi Metro Rail Corporation and Karnataka Power Transmission Corporation Limited have dispensed with levy of cess on contracts for mere supply of goods by issuing written instructions to that effect.
It is further contended by the counsel of the petitioner that even though petitioner engaged labourer in executing the Schedule-D work, those labourers were engaged by him only for the purpose of unloading and placing the Page - 5 of 6 materials so unloaded in a stack format and not to achieve any further end result viz., laying of the blanketing materials. Counsel, therefore, contends that in such circumstances, levy of cess on the petitioner treating him as a contractor is completely erroneous and contrary to the provisions of BOCW Act. In support of his contention, learned counsel has relied on the decision of the Apex Court in Uttar Pradesh Power Transmission Corporation Limited and Another vs. CG Power and Industrial Solutions Limited and Another reported in (2021) 6 SCC 15 wherein the Apex Court has held that BOCW Act excludes a supply contract from within its ambit and a contractor who enters into a pure supply contract is statutorily exempted from levy of cess under the BOCW Act. Observations of the Apex Court are as under:
"51. The clear statutory scheme of the BOCW Act excludes a supply contract from within its ambit. On behalf of the Respondent 1, it is pointed out that several public authorities and corporations, such as the Delhi Metro Rail Corporation and Karnataka Power Transmission Corporation Ltd., 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 to the rejoinder of Respondent 1 in the High Court.
52. Under Section 2(1)(g) of the BOCW Act the term "Contractor"
means a person who undertakes to produce a given result for any establishment, other than a mere supply of goods or articles of manufacture, by the employment of building workers or who supplies building workers for any work of the establishment and includes a sub-contractor. The Respondent 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 Respondent 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. Respondent 1 neither falls within the definition of "contractor" in Page - 6 of 6 Section 2(1)(g) nor 2(1)(i)(iii) of the BOCW Act. Apparently, Respondent 1 is not liable to cess in respect of the first, second and fourth contracts.
53. Cess under the Cess Act read with BOCW Act is leviable in respect of building and other construction works. The condition precedent for imposition of cess under the Cess Act is the construction, repair, demolition or maintenance of and/or in relation to a building or any other work of construction, transmission towers, in relation inter alia to generation, transmission and distribution of power, electric lines, pipelines etc. Mere installation and/or erection of pipelines, equipments for generation or transmission or distribution of power, electric wires, transmission towers, etc. which do not involve construction work are not amenable to cess under the Cess Act. Accordingly no intimation or information was given or any return filed with the assessing officer under the Cess Act or the Inspector under the BOCW Act in respect of the first and second contracts, either by UPPTCL or by the Respondent 1.
54. A contractor who enters into a pure supply contract is statutorily exempted from levy under the BOCW Act..................." Having examined the case in the light of the judgment of the Apex Court cited to supra, we are of the view that petitioner was engaged for merely supplying and stacking of granular materials and not to achieve any further end result. Therefore, levy of cess for the Schedule-D work was completely erroneous and contrary to law. Consequently, the petition stands allowed.
Labour cess recovered from the petitioner, if any, for the Schedule-D work shall be refunded to him by the respondents.
In view of the above, the petition stands disposed of. Pending application(s), if any, shall also stand disposed of. (S.G.CHATTOPADHYAY), J (INDRAJIT MAHANTY), CJ Rudradeep