9911796707
TMI Blog2011 (8) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulated date for completion of the work was 1st November, 2002. (c) Thereafter the work was finally completed by the Respondent/Claimant on 29th January, 2006. (d) Subsequently, disputes arose between the parties for the reason that at the time of making the final payment to the Respondent/Claimant an amount of Rs. 57,19,257/- was deducted by the Appellant/Delhi Metro Rail Corporation (DMRC) towards labour cess and an amount to the tune of Rs. 4,08,074/- was accordingly withheld. (e) In response to the protest by the Respondent/Claimant against the deductions, the Appellant/DMRC vide letter dated 28th August, 2007 conveyed to the Respondent/Claimant that the deductions were made in view of the statutory provisions of the Building and Other Construction Workers' Welfare Cess Act, 1996 (hereinafter referred to as the 'Cess Act') read with the Building and Other Construction Workers' Welfare Cess Rules, 1998 (hereinafter referred to as the 'Cess Rules') and the Building and Other Construction Workers' (Regulation of Employment and Conditions of Service) Act, 1996 (hereinafter referred to as the 'BOCW Act'), which provide for deduction to be made at 1% of the gross amount of wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t holding that the Appellant/DMRC was wrong in deducting a sum of Rs. 74,02,966/- towards labour cess from the final bill payment to be made to the Respondent/Claimant. (g) The Appellant challenged the Award before the learned Single Judge under Section 34 of the A&C Act. (h) Learned Single Judge upheld the Award of the Arbitral Tribunal stating that the Award has been correctly passed on the basis of the decision of the Division Bench in Builders Association of India (supra). Learned Single Judge further refused to interfere with the Award pointing out that the question in issue has already been dealt with by the learned Single Judge in great detail while passing the Judgment dated 7th September, 2011 in Delhi Metro Rail Corporation Limited -vs- Simplex Infrastructures Limited, OMP No. 29/2010 (resulting in FAO (OS) 674/2010). 4. On behalf of the Appellant it has been argued that the Cess Act and the Cess Rules were already in force in the whole of India since 1996 and thus the labour cess was charged by the DMRC on account of the provisions contained therein. The next contention urged on behalf of Counsel for the Appellant was that the definition of the 'employer' provided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation 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. .............. 14. Power to make rules.- (1) The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Act. (2) Without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:- (a) the manner in which and the time within which the cess shall be collected under subsection (2) of section3; (b) the rate or rates of advance cess leviable under sub-section (4) of section 3; (c) the particulars of the returns to be furnished, the officer or authority to whom or to which such returns shall be furnished and the matter and time of furnishing such returns under sub-section(1) of section 4; (d) the powers which may be exercised by the officer or authority under section 7; (e) the authority which may impose penalty under section 9; (f) the authority to which an appeal may be filed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government; Explanation.- For the purpose of subclause (ii), "public sector undertaking" means any corporation established by or under any Central, State or Provincial Act or a Government Company as defined in section 617 of the Companies Act, 1956 (1 of 1956), which is owned, controlled or managed by the Central Government; (iii) in relation to any other establishment which employs building workers either directly or through a contractor, the Government of the State in which that other establishment is situate; ................. ................. (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 subcontractor; ................. (i) "employer", in relation to an establishment, means the owner thereof, and includes,- (i) in relation to a building or other construction work carried 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and for purposes authorised by this Act. (3) No Board shall, in my financial year, incur expenses towards salaries, allowances and other remuneration to its members, officers and other employees and for meeting the other administrative expenses five per cent of its total expenses during that financial year. (c) The relevant Rules under the Cess Rules read as follows: 1. Short title and commencement.- (1) These rules may be called the Building and Other Construction Workers' Welfare Cess Rules, 1998. (2) They shall come into force on the date of their publication in the Official Gazette. ____________________ 1. Vide G.S.R. 149(E), dated 26th March, 1998, published in the Gazette of India, Extra., Pt. II, Sec. 3 (i), dated 26th march, 1998. ..................... ..................... 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 finalized, whichever is earlier, to the cess collector. (2) Notwithstanding the provisions of sub-rule (1), where the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... throughout the country on the 3rd day of November, 1995. The Cess Act provided for the levy of a cess for the purposes of the BOCW Act at a rate not exceeding 2% but not less than 1% of the cost of construction incurred by the employer, as the Central Government by notification in the Official Gazette may specify. Vide Notification dated 26th September, 1996 of the Ministry of Labour the cess under the Cess Act was specified @ 1%. The Notification dated 26th September, 1996 of the Ministry of Labour reads as follows: "NOTIFICATION New Delhi, the 26th September, 199 S.O.2899 - In exercise of powers conferred by subsection (1) of section 3 of the Building and Other Construction Workers' Welfare Cess Act, 1996 (28 of 1996) and in supersession of the notification of the Government of India in the Ministry of Labour No. S.O. 1767 dated the 17th May, 1996 the Central Government specifies a cess for the purposes of the Building and Other Construction Workers (Regulation of Employment and Other Conditions of Service) Act, 1996 (27 of 1996) at the rate of 1 per cent, of the cost of construction incurred by an employer." (c) It is further stipulated that the cess levied would be collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplated therein. This view is supported by the decision of Single Judge of the Madras High Court in Writ Petition No.6174/2010 decided on 30th March, 2010 reported as M.E.S. Builders' Association of India -vs- Union of India, wherein the learned Single Judge concluded that "merely because the State Government has not constituted a board will not make the petitioner builders not to pay cess as per the notified enactment", since the Cess Act was brought into force with effect from 3rd November, 1995 and the Act mandated under Section 3 for levy and collection of cess. It is further clear that the cess was leviable on the cost of construction incurred by the employer and that it was deductable at source in the case of contractors from the bills paid for building and construction works. 10. In view of the above, it is observed that it became incumbent upon the Appellant to deduct the cess from the bills of the Respondents @2% right from the day the said Act came into force, that is 3rd November, 1995 and @1% from 26th September, 1996 under the Notification extracted hereinabove. In this view of the matter, both the Arbitral Tribunal and the learned Single Judge fell into error in comi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dhillon, (1972) 83 ITR 582(SC), Kunnathat Thathunni Moopil Nair v. State of Kerala, (1961) 3 SCR 77, Goodricke Group Limited v. State of West Bengal, 1995 (50) ECC 138 and State of West Bengal v. Kesoram Industries, (2004) 266 ITR 721(SC). (e) The stand of the Union of India in its counter affidavit that the subject matter of the BOCW Act is covered by Entries 23 and 24 in List III (concurrent list) is untenable. Those entries per se cannot save the invalidity of statue since there is no corresponding taxation entry in List III. (f) The Circular 9.1.2006 issued by the DMRC is invalid since even within the definition of the BOCW Act it is the DMRC, as a principal employer which is liable to pay the cess. DMRC has no authority in law to pass on that liability to the contractor. Even under Section 3(2), which requires deduction of 1% cess at source from the bills signifying the cost of construction, it is the DMRC which has to bear the liability. (g) Even in the context of Section 2(d) of the Cess Act which states that unless the context otherwise requires the definitions of the BOCW Act would apply, the definition of cost of construction can only mean the cost of construction t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purpose.' Applying the Hingir Rampur tests, it has to be held that the Cess Act cannot be construed to be a tax at all. (ii) It is accordingly held that the petitioners have failed to show that the subject matter of the Cess Act falls under any entry in List II or List III. Therefore the subject matter of the Cess Act is within the legislative competence of Parliament with reference to Entry 97 of List I. This part of the discussion is concluded by negativing the challenge by the petitioners to the validity of the Cess Act on the ground of lack of legislative competence. (iii) The main object of the present statute being the augmentation of revenues for the welfare of construction workers, there is nothing arbitrary or unreasonable in such a classification of construction activities and the requirement of deduction of cess at source towards settlement of bills of contractors working for government departments and state agencies. The submission is that classification is discriminatory or arbitrary is without basis and is rejected as such. (iv) The fact that there is deduction of cess at source without a prior assessment cannot render it illegal so long as it remains adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the requirement of deduction of cess at source towards settlement of bills of contractors working for government departments and state agencies". Thus, this Judgment reiterates that the contractors in relation to a building or other construction works of a Government or public sector undertaking would be liable to have the cess deducted at the notified rates from their bills paid for such works, and inferring that the contractors, which included sub-contractors, fell squarely within the definition of employer in relation to such building or other construction works carried on by them. 13. In Gannon Dunkerley and Co. Ltd. -vs- State of Madhya Pradesh, reported as 2009 (5) MPHT 258, a Single Judge of the Madhya Pradesh High Court at Jabalpur, dealing with the issue of interpretation of the expression 'employer' in the Cess Act and the Cess Rules, held that "the intention of the Legislature is, therefore, not only to include the owner of the establishment in the present case the Company but also the Contractors who carries out the work of building or other construction work and is an employer for the purpose of the Construction Workers Act, 1996 and the Cess Act, 1996. Thus, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be set aside? Similarly, under Sub-section (3), arbitral tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If arbitral tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered? Similarly, if the award is non-speaking one and is in violation of Section 31(3), can such award be set aside? IN our view, reading Section 34 conjointly with other provisions of the Act, it appeals that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn't be set aside by the Court. If it is held that such award could not be interfered, it would be contrary to basic concept of justice. If the arbitral tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34. 13. The aforesaid interpretation of the Clause (v) would be in conformity with the settled prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes final is different and the jurisdiction of the Court at that stage could be limited. Similar is the position with regard to the execution of a decree. It is settled law as well as it is provided under Code of civil Procedure that once the decree has attained finality, in an execution proceeding, it may be challenged only on limited grounds such as the decree being without jurisdiction or nullity. But in a case where the judgment and decree is challenged before the Appellate Court or the Court exercising revisional jurisdiction, the jurisdiction of such Court would be wider. therefore, in a case where the validity of award is challenged there is no necessity of giving a narrower meaning to the term 'public policy of India'. On the contrary, wider meaning is required to be given so that the 'patently illegal award' passed by the arbitral tribunal could be set aside. If narrow meaning as contended by the learned senior counsel Mr. Dave is given, some of the provisions of the Arbitration Act would become nugatory. Take for illustration a case wherein there is a specific provision in the contract that for delayed payment of the amount due and payable, no interest wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void." 17. From the reading of the above decision of the Supreme Court, it is clear that under Sub-section 1(a) of Section 28 of A&C Act there is a mandate to the Arbitral Tribunal to decide the dispute in accordance with the substantive law in force in India. Consequently, if the award is contrary to substantive provisions of law, it would be patently illegal and could be interfered with under Section 34 of the A&C Act. The Supreme Court after defining the phrase 'Public Policy of India', used in Section 34, and requiring it to be of wider meaning, observed that an award which is on the face of it patently in violation of statutory provisions cannot be said to be in public interest and can be set aside on the ground of being patently illegal. 18. The above statement of law was approved and reiterated ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
