Jharkhand High Court
M/S Flowmore Limited vs The State Of Jharkhand on 13 June, 2022
Author: Rajesh Shankar
Bench: Rajesh Shankar
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 3835 of 2020
M/s Flowmore Limited, Ranchi, through its Manager (Commercial)-cum-
Authorized Signatory, Mr. Raihan Ahmed ..... Petitioner
Versus
1. The State of Jharkhand, through the Secretary, Department of Labour,
Employment & Training, Ranchi
2. Labour Commissioner, Department of Labour, Employment & Training,
Government of Jharkhand, Ranchi
3. Assistant Labour Commissioner-cum-Cess Assessment Officer, Ranchi
4. Jharkhand Urja Sancharan Nigam Limited, through its Managing Director,
Ranchi
5. Senior Manager (Finance and Accounts), Jharkhand Urja Sancharan Nigam
Limited, through its Managing Director, Ranchi
6. Principal Accountant General, Jharkhand, Ranchi ..... Respondents
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CORAM HON‟BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioner: Mr. M. S. Mittal, Sr. Adv.
For Respondent Nos.1-3: Mr. Sachin Kumar, A.A.G-II For Respondent Nos.4-5: Mr. M. K. Roy, Advocate For Respondent No.6: Ms. Richa Sanchita, Advocate
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12/13.06.2022 The present writ petition has been filed for quashing letter No. 1656 dated 25.08.2020 issued by the Senior Manager (F&A), Jharkhand Urja Sancharan Nigam Limited, Ranchi (the respondent No.5) inasmuch as it relates to levying as well as deducting labour cess under the Building and Other Construction Workers‟ Welfare Cess Act, 1996 [hereinafter referred to as „the Cess Act, 1996‟] to the tune of Rs.3,53,56,963/- from the payment of invoices made towards consultancy charges and supply of materials/equipment for the projects of various Grid Sub-Station (GSS).
2. According to the petitioner, the respondent-JUSNL during pendency of the present writ petition, continued to deduct labour cess to the tune of Rs.2,37,81,437/- while making payments of various ongoing projects and thus the total deduction has now come to Rs.5,91,38,400/-. Hence, additional prayer by way of amendment has been made for issuance of direction upon the respondents to forthwith refund a sum of Rs.5,91,38,400/- which has been illegally and arbitrarily deducted by the respondent No.4 as labour cess on supply of materials and consultancy charges. The petitioner has also prayed for issuance of direction upon the respondents to pay interest @ 18% per annum from the date of the said deduction till the date of actual payment being the 2 compensation for the amount illegally retained by the respondents without jurisdiction.
3. The factual background of the case, as stated in the writ petition, is that the petitioner is primarily involved in the business of engaging in works contracts with government departments/local authorities relating to supply of materials/equipment, consultancy services and erection of electricity transmission lines. The respondent Nos. 4 & 5 in connection with construction of electric grid sub-stations at various locations in the State of Jharkhand such as; Chatra, Rajmahal, Bharagora, Chandankiyari, Tamar, Jamua etc., engaged the services of the petitioner and separate agreements were entered for different scope of civil and structural works namely (i) supply of materials and (ii) erection of Grid Sub-Stations and transmission lines at various locations. Even the terms of payment agreements relating to the aforesaid nature of works were different and distinct. As per the agreement between the parties, the payment was made to the petitioner separately on pro-rata basis for consultancy charges, supply part and erection part. Labour cess under the Cess Act, 1996 was initially deducted by the respondent Nos. 4 & 5 @ 1% for a substantial period only on the erection price. Labour cess was correctly not deducted on consultancy charges and supply of materials as it did not involve any civil work which would entail the services of building and other construction works. Suddenly, the petitioner received letter No. 1656 dated 25.08.2020 issued by the respondent No.5 wherein it was stated that labour cess was deducted from the contractor‟s bills on the erection price, however, on the basis of an expert opinion, it was decided by the competent authority that labour cess was also to be deducted on entire components i.e. on the bills paid earlier towards supply of materials and consultancy services as well as on future bills also. The petitioner submitted its response vide letter dated 05.11.2020 stating inter alia that some of the letters referred to in the letter of the respondent No.5 dated 25.08.2020 had not been served to it. It was further claimed that the imposition of labour cess on supply of materials and consultancy charges was erroneous and based on misconceived 3 interpretation of the applicable law. However, the respondents deducted an amount of Rs.5,91,38,400/- as labour cess on the payments made for supply of materials and consultancy charges for both concluded as well as existing contracts of the ongoing projects.
4. Learned Sr. counsel for the petitioner submits that on bare perusal of the statement of Objects and Reasons of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 [hereinafter referred to as „the BOCW Act, 1996‟], it would be evident that the same was enacted to regulate the employment and conditions of service of the workers and labourers engaged in building and other construction works as also to provide them safety, health and welfare measures and for other matters connected therewith or incidental thereto. Since the sector relating to building and other construction works was highly unorganized and characterized by its casual nature, temporary relationship between employer and employee, uncertain working hours, lack of basic amenities and inadequacy of welfare facilities, the BOCW Act, 1996 was enacted in order to give continued effect of the aforesaid objects and reasons as legislative protection. Thus, ex-facie the BOCW Act, 1996 is attracted when the work involved is in the nature of 'building or other construction work‟ that entails engaging of labourers/workers for civil work. It is further contended that the term „contractor‟, as defined under the BOCW Act, 1996, means a person who undertakes to produce a given result for any establishment other than mere supply of goods or articles of manufacture by engaging the services of labourers/workers for any work of the establishment. Thus, a person by merely supplying materials will not come within the ambit of the term 'contractor' specified in the BOCW Act, 1996. It is further submitted that the petitioner is a contractor of the respondent No.4 for the works of engaging labourers/workers in erection of the grid sub-stations. The word 'employer' has been defined in the BOCW Act, 1996 which includes a contractor and thus the petitioner will also be an employer under the said Act. It is also contended that Section 18 of the BOCW Act, 1996 empowers the State 4 Governments to constitute State Welfare Boards to provide immediate assistance to a beneficiary and monitor social security schemes and welfare measures for the benefit of the building and other construction workers. In order to generate revenue for the Welfare Boards constituted under the Act, 1996, the legislature enacted the Cess Act, 1996 simultaneously with the BOCW Act, 1996. It is further submitted that in exercise of the powers conferred by sub-section (1) of Section 14 of the Cess Act, 1996, the Central Government framed the Building and Other Construction Workers‟ Welfare Cess Rules, 1998 [hereinafter referred to as „the Rules, 1998‟]. Rule 4 of the Rules, 1998 is related with time and manner of collection of cess wherein the provision has been made for deduction of cess payable at the notified rates from the bills paid for the building and other construction works of a government or a public sector undertaking. Rule 5 prescribes the manner in which 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. The term „building or other construction work‟ has been defined under Section 2(1)(d) of the BOCW Act, 1996 which include construction, alteration, repairs, maintenance or demolition in relation to building, streets, roads, railways, generation, transmission and distribution of power, electric lines etc. It also includes those activities which involve putting together or combining things/materials engaging the services of building workers/labourers. Hence, as a necessary corollary, activities such as; supply of materials or providing consultancy services fall outside the scope of the term 'cost of construction‟ and building and other construction work'. It is also submitted that undoubtedly the BOCW Act, 1996, the Cess Act, 1996 as well as the Rules, 1998 are beneficial legislation, however, these do not permit the respondents to distort the plain and unambiguous language of the statutes to such an extent so as to include within its ambit those activities/services which have never been contemplated by the said statutes. It is trite law that where such beneficial legislations have a scheme of their own and there is no vagueness or 5 doubt therein, then there exists no reason for travelling beyond the same and extending the scope of the statute, on the pretext of extending the statutory benefit to activities/transactions which are not covered therein. The definition of „cost of construction‟ and „building and other construction work' under the BOCW Act, 1996, Cess Act, 1996 and the Rules, 1998 cannot be deemed to have included activities such as; supply of materials or consultancy services. Hence, by doing so, the respondents have sought to take upon themselves the task of amending/altering/distorting the plain and unambiguous meaning of the words used in the said statutes. When the intention of the legislature is clearly conveyed, there was no occasion for the respondents to read the words into a statute which are not there, especially when the literal reading of the said enactments produces an intelligible result. It is further submitted that it was the petitioner's legitimate expectation that the respondent No.5 would continue to deduct labour cess only on the labour/construction component. Mere change in opinion cannot defeat the petitioner's legitimate expectation that the respondent No.5 would continue to abide by the proper interpretation of the applicable laws. It is now well settled that if a statute confers power to do a particular act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any manner other than which has been prescribed. Even if it is assumed for the sake of argument that the respondent No.5 was justified in levying labour cess on the supply of materials or on consultancy charges, it ought to have done so in accordance with the manner provided in the Cess Act, 1996 and the Rules, 1998 i.e. at the time of making payment to the petitioner. The Cess Act, 1996 and the Rules, 1998 do not provide procedure for retrospective deduction of the amount of labour cess. It is also submitted that the respondent No.5 did not have the authority/power to deduct the amount of labour cess after making the payment of the petitioner‟s bills. Moreover, mere change in opinion of the respondent No.5 cannot entail deduction of labour cess which was earlier not deducted. The levy of labour 6 cess, if any, could not have been based on the opinion of the expert or upon the condition of „clarity‟ arrived at by the respondent No.5 as mentioned in the impugned letter dated 25.08.2020. It is further submitted that levying of labour cess on past concluded transactions would also be barred by limitation in terms of Rule 4 of the Cess Rules, 1998 as the contracts have been concluded long time back and therefore the deduction of labour cess to the tune of Rs.3,39,28,037.00 on the payment made earlier against the supply of materials and consultancy charges is wholly arbitrary and unreasonable. The deduction of labour cess to the tune of Rs.14,28,926/- on uncleared claims till issuance of the impugned letter dated 25.08.2020 is also unreasonable. It is also submitted that the State authority having received the money without legal right and having retained and used it, is bound to refund the same. The obligation to refund money which has been deducted and retained without any right implies and carries with it the liability of interest as well. As such, the petitioner is also entitled to get interest from the respondents upon the illegally retained amount.
5. Learned A.A.G-II appearing for the respondent-State (the respondent Nos. 1 to 3) submits that the present writ petition is not maintainable in view of the fact that the petitioner has got alternative/statutory/efficacious remedy of preferring appeal under Section 11 of the Cess Act, 1996 read with Rule 14 of the Rules, 1998 before the Deputy Labour Commissioner by challenging the impugned letter dated 25.08.2020. It is further submitted that deduction of labour cess on entire component against earlier payment as well as from future bills has been made after receiving and reviewing expert opinion in the matter as has been explained in the counter affidavit filed on behalf of the respondent No.4 and the respondent No.5. The impugned letter is the intimation given to the petitioner with respect to deduction of labour cess and remittance of the entire deducted amount to the appropriate authority.
6. Learned counsel appearing on behalf of the respondent Nos. 4 & 5 submits that the said respondents have in fact complied the objection raised by the Principal Accountant General (Audit), Jharkhand. It is further submitted that 7 the said objection has not been challenged by the petitioner. The Jharkhand Urja Sancharan Nigam Limited (JUSNL) had floated tenders with respect to designing, erection, testing as well as commissioning of various Grid Sub- Stations and transmission lines on turnkey basis. Thus, the supply of materials and its erection come under single work being composite in nature. The agency which secured L1 position, signed a single contract agreement with JUSNL for supply of material as well as erection and commissioning of Grid Sub-Stations. The JUSNL was earlier of the view that labour cess was to be deducted against the payments which are basically dealing with the Labour Component i.e. civil work/erection work etc. and thus there was practice of deduction of labour cess only on such payment. However, an audit was conducted by the Office of the Principal Accountant General (Audit), Jharkhand, Ranchi wherein it was reported that the JUSNL deducted labour cess of Rs.4.38 Crores on erection price from the contractor‟s bills, however, it failed to deduct labour cess on the payment of contractor‟s bill which was made towards consultancy charge/supply price in violation of Rule 3 of the Rules, 1998 leading to short deduction of labour cess of Rs.16.31 Crores. Accordingly, vide letter No. 950 dated 04.06.2020, the JUSNL got an expert opinion of the Chartered Accountant, namely, M/s Jain Saraogi & Co. on short deduction of labour cess as per the Rules, 1998 wherein it opined that the Cess Act, 1996 provides for levy of cess on the cost of construction incurred by an employer. The term „cost of construction‟ has been defined in Rule 3 of the Rules, 1998 for the purpose of levy of cess under sub-section (1) of Section 3 of the Cess Act, which includes all expenditure incurred by an employer in connection with the building or other construction work. The agreements for work contracts were composite in nature and thus the labour cess was to be deducted from all the cost of the project including the cost of supply/consultancy/engineering. It is also submitted that the entire amount recovered from the contractor‟s bills has duly been deposited with Labour, Employment & Training Department, Government of Jharkhand.
7. Heard learned counsel for the parties and perused the relevant materials 8 available on record. The petitioner is aggrieved with the action of the respondent No.5 whereby labour cess has also been recovered from it on supply of materials and consultancy charges. The thrust of the argument of learned Sr. counsel for the petitioner is that the labour cess is not leviable on supply of materials and consultancy charges as in view of the provisions of the BOCW Act, 1996, Cess Act, 1996 and the Rules, 1998, the same is leviable only on civil works.
8. Learned Sr. counsel for the petitioner puts reliance and gives much emphasis on a judgment rendered by the Hon‟ble Supreme Court in the case of U.P. Power Transmission Corporation Limited & Anr. Vs. CG Power & Industrial Solutions Limited & Anr. reported in (2021) 6 SCC 15. In the said case, M/s CG Power and Industrial Solutions Limited (the respondent No.1) had entered into a framework agreement with UPPTCL for construction of 765/400 KV substations at Unnao, Uttar Pradesh. The work was split and covered by four separate contracts. The first contract covered supply and delivery of all equipment and materials with accessories and auxiliaries as per schedule of quantities and prices to sub-station contained in the concerned contract and supply of any other item necessary to complete the scope of work was also included without any extra cost, if not specified in the said schedule. 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 the scope for commissioning and handing over of the entire sub-station. The third contract covered all civil works including materials to complete the scope for commissioning and handing over the entire sub-station. The fourth contract covered operations and maintenance for three years. The respondent No.1 duly performed the first contract and the bills raised were duly cleared. However, after an audit objection, the respondent No.1 (contractor) was served with a letter informing that labour cess would be collected on the project cost which would also include supply of equipment and materials as well as erection work. 9 Subsequently, the Superintending Engineer of UPPTCL asked the Executive Engineer to recover the labour cess on the supply part of the composite contract from the pending bills of the respondent No.1 and in case any amount still remained outstanding, to deduct the same by encashment of the performance bank guarantee held to secure payment of labour cess. The respondent No.1 filed writ petition against the said decision of UPPTCL and the High Court set aside the demand of labour cess made from the respondent No.1. Aggrieved thereby, the UPPTCL preferred appeal before the Hon‟ble Supreme Court. Their Lordships found several infirmities in the decision of making demand of labour cess from the first contract and observed that there was no provision in the first contract, second contract, third contract or fourth contract or in the special conditions of contract or the General Conditions of contract for supply of Plant and execution of work which enables the UPPTCL to withhold any amount from the bills raised by the respondent No.1. It has been further held that it is not the case of the UPPTCL that the respondent No.1 had committed breach or default in performance of the first contract.
9. So far as the levy of labour cess on a supply contract is concerned, Their Lordships have specifically held that the clear statutory scheme of the BOCW Act excludes a supply contract from its ambit. The relevant paragraphs of the said judgment are quoted hereinbelow:-
"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. 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 Section 2(1)(g) nor 2(1)(i)(iii) of the BOCW Act. Apparently, Respondent 1 is not liable to 10 cess in respect of the first, second and fourth contracts.
53. Cess under the Cess Act read with the 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 Respondent
1."
10. Their Lordships, after having observed so, have held that a contractor who enters into a pure supply contract, is statutorily exempted from levy under the BOCW Act.
11. Now reverting back to the present case to examine as to whether the supply contract of the petitioner was a distinct/separable contract from the civil work as has been claimed by the petitioner. Learned Sr. counsel for the petitioner has referred Clause 14.7 to the Instructions to Bidders (ITB) and Clause 4.4 of the General Conditions of Contract of NIT No. 244/PR/JUSNL/2018-19 which was related to Simaria Project as has been brought on record by the petitioner as Annexure-12 to the supplementary affidavit dated 31.05.2021. Both these clauses are quoted hereinbelow for ready reference in the present case:-
"ITB.14.7 The bid prices are required to be broken down in the Price Schedules in the manner and detail so that figures for Equipment/Materials and services respectively are available clearly for award of Contract under two (2) separate Contracts in accordance with GCC.4.4.
GCC.4.4. Construction of Contract The Contracts to be entered into between the Purchaser and the successful bidder shall be as under:
a. „First Contract‟ for supply of Equipment/Materials including spares loading, transportation for delivery at Site, transit insurance, unloading, storage, 11 handling at Site.
b. „Second Contract‟ for electrical and civil works as per Price Schedule including installation services, rates and prices for all material/labour, Contractor‟s Equipment, temporary works, consumables and all matters and things of whatsoever nature of such works, training of Purchaser‟s personnel, etc. and all other services specified in the Contract Documents."
12. I have also perused Clause 4.5 of the General Conditions of Contract of the aforesaid NIT which reads as under:-
"GCC.4.5. The award of separate Contracts shall not in any way dilute the responsibility of the contractor for the successful completion of the Works as per Contract Documents and all Contracts shall contain a cross fall breach clause, i.e a breach in one contract shall automatically be construed as a breach of the other Contracts which will confer a right on the Purchaser to terminate the other Contracts also at the risk and the cost of the Contractor."
13. On bare perusal of the aforesaid clauses of the NIT of Simaria Project, it appears that two separate contracts were required to be entered between the purchaser and the successful bidder. One was for supply of equipment/materials including spares loading, transportation for delivery at Site, transit insurance, unloading, storage, handling at site and other for electrical and civil works. Moreover, the bid prices of both the contracts were also required to be broken down so that figures for supply of equipment/materials and services respectively would be available clearly for award of contract. The Court further finds that separate agreements were entered between the petitioner and the respondent- JUSNL for both the contracts. LoA No. 16 dated 21.02.2019 was for supply of materials whereas LoA No. 20 dated 21.02.2019 was for erection and civil works. The total contract price for supply of materials was Rs.32,43,34,278.92 and contract price for erection work was Rs.12,68,01,552.00 as transpires from the letters of award of both the contracts.
14. Learned Sr. counsel for the petitioner has also brought on record the purchase order and work order for designing, engineering, supply of materials, equipment, erection, testing and commissioning of Grid Sub-Station at Bahragora, Jamua and Chandankyari on turnkey basis. It is evident that Purchase Order being P.O. No. 02 C.E.(T)/J.U.S.N.L dated 18.01.2017 was for 12 supply of materials and work order being W.O. No. 02 C.E.(T)/J.U.S.N.L dated 18.01.2017 was for erection, testing and commissioning of all supplied materials and thus two separate contracts were entered into for supply and civil work. Moreover, the contract price for both the works was separate i.e. purchase order relating to supply of materials was valued at Rs.87,51,77,838 and the work order relating to erection and civil works was valued at Rs.26,66,70,906.75.
15. Thus, I find substance in the argument of learned Sr. counsel for the petitioner that the contract for supply of materials was distinct from the contract for civil work and as such the labour cess was not leviable on the first contract i.e. the contract for supply of materials.
16. In the case in hand, the specific stand of the respondent-JUSNL is that initially JUSNL was of the view that labour cess was to be deducted towards the payments which were basically dealing with the Labour Component i.e. civil work/erection work etc. and not from the payment of contract relating to supply of materials, however, the Office of the Principal Accountant General (Audit), Jharkhand, Ranchi raised objection against not deducting labour cess from payment of supply of materials and thereafter the opinion was sought from a Chartered Accountant, namely, M/s Jain Saraogi & Co. which opined that the labour cess was to be deducted from all the entire cost project including cost of supply/consultancy/engineering and thereafter the impugned letter dated 25.08.2020 was issued and the entire amount was recovered from the petitioner‟s bill which is said to have been duly deposited with the Labour, Employment & Training Department, Government of Jharkhand. Therefore, this Court finds that initially the JUSNL was also of the view that the cess would not be leviable against payment of supply of materials, however, pursuant to the opinion of the Principal Accountant General (Audit), Jharkhand, the same was recovered from the petitioner.
17. In the case of Uttar Pradesh Power Transmission Corporation Ltd. (Supra) also, their Lordships have observed that the initial stand of UPPTCL was that the labour cess from supply bills had not to be deducted as there was no 13 involvement of labour in supply of materials whereas labour cess had to be deducted from the erection bill. Thus, there was apparently no dispute, difference or controversy between UPPTCL and the respondent No.1 with regard to the true construction, meaning or intent of any part of the conditions of contract or the manner of execution or quality or description or payment for the same. There was also no dispute with regard to the true meaning, intent, interpretation, construction or effect of the clauses of contract, specifications or drawings or any of them. Nevertheless, the labour cess in respect of the first contract was deducted only in view of the audit objection raised by the Office of the Comptroller and Auditor General (CAG).
18. Their Lordships, after having cited few earlier judgments of the Hon‟ble Supreme Court, have held that in absence of any adjudication, it was impermissible for UPPTCL to issue the impugned communication so as to realize cess solely on the basis of the report of the CAG. Paragraphs 61 & 62 of the said judgment are quoted hereinbelow for ready reference in the present case:-
"61. In [Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1], this Court held that when CAG Report was subject to scrutiny of the Public Accounts Committee and the Joint Parliamentary Committee, it would not be proper to refer 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, (2013) 7 SCC 1] , where this Court held:
"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.
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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 Report. The CAG Report is always subject to parliamentary debates and it is possible that PAC 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 Report."
62. In [Pathan Mohammed Suleman Rehmat khan v. State of Gujarat, (2014) 4 SCC 156], this 14 Court held: (SCC pp. 161-62, paras 9-10 & 12) "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 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 [Pathan Mohammed Suleman Rehmat khan v. State of Gujarat, 2013 SCC OnLineGuj 5391] by the High Court. In Arun Kumar Agrawal v. Union of India, (2013) 7 SCC 1], this Court held as follows: (SCC p. 24, para 68) „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 Report. The Ministry can always point out, if there is any mistake in the CAG 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 authorities or other bodies had used their resources in 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 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 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 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.
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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], wherein it was held that when the CAG Report is subject to scrutiny by the Public Accounts Committee and the Joint Parliamentary Committee, it would not be proper to refer to the findings and 15 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."
19. Thus, in the case of Uttar Pradesh Power Transmission Corporation Ltd. (Supra), the Hon‟ble Supreme Court has specifically held that realization of cess is not permissible solely on the basis of the report of the CAG in absence of any adjudication. In view of the specific finding of the Hon‟ble Supreme Court, this Court also comprehends that the impugned letter dated 25.08.2020 for realization of labour cess from payment of supply of materials has been issued without application of mind and therefore the same is vitiated in law on that score as well. So far as obtaining the opinion of the Chartered Accountant is concerned, the same cannot be said to be adjudication.
20. One of the contentions of learned Sr. counsel for the respondent-JUSNL is that it was provided in the letters of award as well as in the NIT that the responsibility for completion of work was joint and any breach under one contract shall automatically be deemed as a breach of other contract and any such breach or occurrence or default made in one contract will give right to the respondent-JUSNL to terminate the other contract also and vice versa. However, the said argument will also not help the case of the respondent-JUSNL in view of the fact that the Hon‟ble Supreme Court in Uttar Pradesh Power Transmission Corporation Ltd. (Supra), having considered the relevant provisions of law and under similar factual context in the said case, has held that four contracts were treated as singular only for the reason to fix responsibility for timely execution of the works and for all other purposes including levy of any tax and fees, the contract for supply was understood by the parties as separate and distinct contract.
21. The argument of learned A.A.G-II appearing on behalf of the respondent Nos. 1 to 3 is that the petitioner has got alternative/statutory/efficacious remedy of preferring appeal against the impugned order before the Appellate Authority i.e. the Deputy Labour Commissioner under Section 11 of the Cess Act, 1996 read with Rule 14 of the Rules, 1998 and as such the present writ 16 petition is not maintainable.
22. Before coming to the said contention of learned A.A.G-II, it would be relevant to refer the judgment rendered by the Hon‟ble Apex Court in the case of Uttar Pradesh Transmission Corporation Ltd. (Supra) wherein following the settled law, it has also been held 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: (i) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge. It has been further held that there was no legal infirmity in the finding of the High Court that UPPTCL acted in excess of power by its acts impugned when there was admittedly no assessment or levy of cess under the Cess Act. Even otherwise, the Cess Act and/or statutory rules framed thereunder prescribe the mode and manner of recovery of outstanding cess under the Cess Act and when statute requires a thing to be done in a particular manner, it is to be done in that manner alone. Since the fact of the present case is almost identical, the argument of the learned A.A.G-II with regard to maintainability of the present writ petition is not worth consideration.
23. Moreover, the respondent-JUSNL has recovered the labour cess on supply of materials after making payment of the petitioner‟s bill which was also not in accordance with Section 3(2) of the Cess Act, 1996 read with Rule 4 of the Rules, 1998 which specifically provides that the deduction of cess shall be made from the bills paid to the contractor and payment of the same shall be made by an employer to the Cess Collector as per the provisions of Rule 4 of the Rules, 1998. Learned counsel for the petitioner has rightly argued that if the law provides for the mechanism for levy, collection and assessment of cess, the same has to be recovered from the same mechanism and not otherwise. In the case of Uttar Pradesh Power Transmission Corporation Ltd. (Supra), the 17 Hon‟ble Supreme Court has held that when the statute requires a thing to be done in a particular manner, it is to be done in that manner alone and UTTPCL had no power and authority and/or jurisdiction to realize labour cess in respect of the first contract by withholding dues in respect of other contracts and/or invoking a performance guarantee.
24. I am of the considered view that the case of the petitioner is squarely covered by the judgment of the Hon‟ble Supreme Court rendered in the case of Uttar Pradesh Transmission Corporation Ltd. (Supra). Thus, in the case in hand, the labour cess deducted from the petitioner‟s bill on consultancy charges/supply of materials is liable to be set aside and the petitioner is entitled for refund of the amount already deducted from it towards the same.
25. Learned Sr. counsel for the petitioner has referred several provisions of the BOCW Act, the Cess Act and the Cess Rules so as to satisfy this Court that the labour cess is not leviable purely on supply contract. Since the judgment of the Hon‟ble Supreme Court rendered in the case of Uttar Pradesh Transmission Corporation Ltd. (Supra) has set the issue at rest and the said judgment is fully applicable to the case in hand, this Court does not feel it necessary to refer all such provisions of the aforesaid statues so as to re-consider the issue which has already been settled by the Hon‟ble Supreme Court.
26. Learned Sr. counsel for the petitioner submits that since the petitioner is entitled to refund of the amount of labour cess illegally deducted towards payments made against consultancy charges/supply price of materials, it is also entitled to get interest over the said amount illegally retained by the respondents.
27. In support of the said submission, learned Sr. counsel for the petitioner puts reliance on a judgment rendered by this Court in the case of UK Mechanical Engineering Pvt. Ltd. Vs. The Zonal Manager, Corporation Bank & Ors. (W.P.C No. 5561 of 2019). In the said case, the claim of UK Mechanical was for refund of the consideration amount as well as for payment 18 of interest over the same. It was observed by this Court that the petitioner of the said case was the auction purchaser and it had deposited the sale consideration, however, the bank had failed to hand over the physical possession of the said property. In the counter affidavit, the bank had admitted that the possession could not be handed over due to the order passed by the District Magistrate, East Singhbhum, Jamshedpur denying approval for grant of possession of the said property as it came under the purview of the Chotanagpur Tenancy Act, 1908. The bank had also admitted that it had already decided to refund the sale consideration to the auction purchaser, however, in absence of the bank account details of the petitioner, the money could not be refunded to it. Having observed so, this Court held as under:-
"9. In the case of State of Uttar Pradesh & Others Vs. Jaswant Sugar Mills Limited & Others reported in (2014) 16 SCC 760, under the background that the auction purchasers had deposited the auction amount within the stipulated period and the title of the land was also transferred in their favour, however the High Court subsequently cancelled the said auction and directed for refund of the deposited amount to the auction purchasers, the Hon‟ble Supreme Court while framing the question for determination as to why the amount, which was directed to be refunded to the auction-purchasers, should not bear reasonable interest, has held as under:-
"35. In a situation like in the present case, one cannot hold of any statute entitling the auction-purchasers to claim interest, in case the auction got cancelled or set aside by the court of law. The counsel for the parties also could not refer to any of the clauses of auction prescribing interest on refund of amount in case of cancellation of auction or sale. The question arises as to whether in such a situation an auction-purchaser can claim interest on equitable grounds.
36. In State of Maharashtra v. Maimuma Banu [State of Maharashtra v. Maimuma Banu, (2003) 7 SCC 448] the question arose as to whether interest was payable on rental compensation. In the said case, the government resolution concerned provided for payment of rental compensation expeditiously but no provision was made to pay interest in case of delayed payment. This Court in the said case held: (SCC p. 452, paras 10-11) "10. The crucial question is whether there can be any direction for interest on rental compensation once it is held that the same 19 has to be paid within the time-frame, notwithstanding the fact that there is no statutory obligation.
11. It is not in dispute that in certain cases payments have already been made. Though the inevitable conclusion is that the High Court is not justified in directing grant of interest on the logic of various provisions contained in the Act, yet there is an element of equity in favour of the landowners. It is, however, seen that the writ applications were filed long after the possession was taken. This factor cannot be lost sight of while working out the equities.
It would, therefore, be appropriate if the appellants pay interest @ 6% from 1-4- 2000 till amounts payable as rental compensation are paid to the landowners concerned. This direction shall not apply to those cases where the payments have already been made prior to 1-4-2000.
Appeals are allowed to the extent indicated without any stipulation of costs."
37. In the present case, we find that there was no misrepresentation on the part of the auction-purchasers; they deposited the total auction amount within the time stipulated. It has not been in dispute that the title of the land was also transferred in their favour. But for the reasons mentioned by the High Court the sale has been cancelled. It has been ordered to refund amount in favour of the auction-purchaser/appellant(s). We find no reason as to why on equitable grounds the appellants should not get interest on the said amount. Taking into consideration the aforesaid factor while working out equities, it would, therefore, be appropriate to direct the State to pay interest at the rate of 6% on the amount to be refunded as per the High Court's order with effect from 27-4-2001 and 3-9- 2001, the day the High Court passed the impugned order. The respondents concerned are directed accordingly."
10. Having considered the petitioner‟s claim for payment of interest over the principal amount withheld by the respondent-Bank and keeping in view the aforesaid judgment rendered by the Hon‟ble apex Court, I hold that the petitioner is entitled for refund of Rs.56,85,000/- deposited by it with the respondent-Bank, along with the interest at the rate of 6% per annum from the date of deposit till the date of the said refund.
11. Hence, the respondent-Bank is directed to refund Rs.56,85,000/- along with interest at the rate of 6% per annum from the date of deposit of the said amount till the date of its payment/refund.
However, if the respondent-Bank fails to make such payment within a period of 30 days from the date of receipt/production of a copy of this order, it shall be 20 liable to pay compensatory interest at the rate of 10% per annum thereafter."
28. On this aspect, a co-ordinate Bench of this Court vide order dated 21.05.2021, while disposing of I.A. No. 2375/2021 filed on behalf of the petitioner for restraining the respondents from illegally deducting labour cess from payments being made towards supply of materials during pendency of the present writ petition, has observed as under:
"6. In this view of the matter, the instant interlocutory application being I.A. No. 2375 of 2021 is hereby disposed of by observing that if the writ application is allowed in favour of the petitioner and the recovered amount will be refunded by the respondents; the petitioner shall be free to raise the claim for payment of interest before the appropriate authority which shall be decided in accordance with law and also in the light of the judgment passed by the Hon‟ble Apex Court in the case of Uttar Pradesh Transmission Corporation Ltd. & Anr. Vs. CG Power and Industrial Solutions Limited and Another reported in 2021 SCC Online SC 383.
Consequently, I.A. No. 2375 of 2021 is hereby disposed of."
29. Considering the aforesaid liberty granted to the petitioner, there is no need to adjudicate its claim for interest over the deducted amount of labour cess.
30. In view of the aforesaid discussions, the present writ petition is disposed of in the following terms:
(i) Letter No. 1656 dated 25.08.2020 issued by the Senior Manager (F&A), Jharkhand Urja Sancharan Nigam Limited, Ranchi (the respondent No.5) [Annexure-1 to the writ petition] is hereby quashed.
(ii) The labour cess is not leviable on supply of materials and consultancy charge with respect to the contracts in question as the same are distinct from the contract for civil works.
(iii) The respondent-JUSNL is directed to communicate the Department of Labour, Employment and Training, Government of 21 Jharkhand regarding refund of labour cess deducted against the petitioner‟s bills for supply of materials and consultancy charges which is said to have been deposited by it with the said department, within two weeks from the date of receipt/production of a copy of this order.
(iv) The competent authority of the Department of Labour, Employment and Training, Government of Jharkhand, Ranchi is directed to refund the amount of labour cess which has been deducted from the petitioner‟s bill for supply of materials and consultancy charges through the respondent-JUSNL within one month from the date of receipt of the communication from the respondent-JUSNL.
(v) The petitioner will be at liberty to move before the appropriate authority claiming interest on the deducted amount in terms with the order of a co-ordinate Bench of this Court as referred in paragraph 28 of the judgment.
31. Consequently, I.A. No. 730/2022 also stands disposed of.
Satish/A.F.R (RAJESH SHANKAR, J)