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43. By the impugned order dated 24 th 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.

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 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 the Cess Act of 1996 recovery could not be made pursuant to an audit objection of CAG.

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 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 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 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 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 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 payments are made by the owner. In short, the burden of Cess is passed on from the owner to the contractor.

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 No.1.