Indian Kanoon - Search engine for Indian Law

"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 Workers' Welfare Fund and there shall be credited thereto--

(a) any grants and loans made to the Board by the Central Government under section 23;

(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. (2) The Fund shall be applied for meeting--

6. The Cess Act was enacted for the purpose to provide for the levy and collection of cess on the cost of construction incurred by the employers with a view to augmenting the resources of the Building and other Construction Workers' Welfare Fund constituted under the Regulation Act. Section 3 thereof, provides for levy and WP(C) NO.32248 OF 2024 : 207: 2026:KER:14329 AND CONNECTED CASES collection of cess, which reads as follows:-

"3. Levy and collection of cess.--(1) There shall be levied and collected a cess for the purposes of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (27 of 1996), 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 Central Government may, by notification in the Official Gazette, from time to time specify.

8. These are the statutory provisions that lay down the scheme under which the Building and other Construction workers' Welfare Cess is to be determined and collected. The persons responsible to make the said payments are also referred to in the above said provisions.

9. Apart from the above, the manner in which, the assessment, recovery and other matters relating thereto, is to be made, is prescribed in The Buildings and Other construction Workers' Welfare Cess Rules, 1998 (hereinafter, referred to as "Cess Rules"). Rule 3 provides for the levy of cess, which gives an indication as to how, the cost of construction has to be reckoned.

18. However, since in these cases, the liability of the contractor is not confined to the supply alone and it extends to the execution of the work, the obligations of the contractors cannot be fulfilled, without availing the services of the building and other construction workers. Further, the supply of goods are made for the purpose of execution of the works, and thus execution is the main purpose of the contract and the supply is an incidental activity that is necessary for facilitating the execution of the work. Thus, the predominant object of the contract is, to carry out the work. As part of such obligation to execute the work, the moment when the contractors avail the services of the building and other construction workers, the incidence of cess, as contemplated in the Cess Act would occur with all its vigour, and such contractors would become WP(C) NO.32248 OF 2024 : 219: 2026:KER:14329 AND CONNECTED CASES liable to make the payment of cess. Therefore, once the contractor is availing the services of such workers, the operation of the Cess Act gets triggered, and the amount towards cess, would become payable on the cost of construction incurred by such contractor. As far as the value of the articles supplied are concerned, since the said goods are subsumed in the construction, and the cess is to be calculated on the cost of construction, the value of such goods cannot be segregated, while determining the amount of cess. Cost of such supply is the integral part of the cost of construction and hence an assessment of cess, without including the cost of supply, would not be proper, in a case where, the activity is found to be coming within section 2(1)(d) of the Regulation Act and the contractor had availed the services of the building and other construction workers, for fulfilment of the obligations under the contract in question. Any other interpretation would defeat the purpose of the Cess Act, as excluding the value of the supply part, from determining the cess, would substantially reduce the amount that could be collected as cess. In this regard, it is to be noted that, the whole purpose of the enactment of the Cess Act, is to augment the resources of the Building and Other Construction Worker's WP(C) NO.32248 OF 2024 : 220: 2026:KER:14329 AND CONNECTED CASES Welfare Boards constituted under the provisions of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, and thus, it is a welfare legislation.