THE HON’BLE SRI JUSTICE L. NARASIMHA REDDY WRIT PETITION Nos.11269, 13395, 13996, 14314, 15672, 16098, 16162, 16684, 17084, 17424, 17836, 18615, 18623, 19042, 21434, 21973, 22454, 22476, 22494 and 22605 of 2009 COMMON ORDER: The workers in the construction field are unorganized and are not governed by the various legislations that are intended for the benefit of workmen of industries and factories. With a view to take welfare measures for them, the Parliament enacted the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (‘1996 Act’ for short). Various aspects such as creation of fund, registration of workers/beneficiaries and issuance of identity cards were provided for. Committees are constituted at state and central levels to regulate the system. For the purpose of pooling necessary resources and to augment finances to carry out the objectives under the 1996 Act, the Parliament enacted the Building and other Construction Workers Welfare Cess Act, 1996 (‘Cess Act’ for short). This makes it obligatory on the part of the employers to pay to the competent authority, cess at prescribed rate, which shall not be more than 2 % and less than 1%. The petitioners in this batch of writ petitions are civil contractors registered with various departments of Government. The departments and agencies that entrusted works to the petitioners are taking steps to deduct cess @ 1% from the bills payable to the petitioners. The grievance of the petitioners is that the agencies concerned are not including the component of cess in the estimates and are burdening them by effecting deduction of that amount. They place reliance upon orders issued by the Government from time to time, including U.O. Note dated 28.02.2008, through which the finance department of Government of Andhra Pradesh required the various departments undertaking construction works to include cess at 1% in the estimates. These writ petitions are filed with a prayer to direct the respondents concerned to include 1% amount in the estimates towards labour cess. On behalf of the respondents, counter affidavits are filed in some writ petitions. The scope of the relevant enactments is explained and it is pleaded that necessary directions have been issued to the departments concerned to ensure that 1% cess is included in the estimates. Exception is claimed as regards the works that have already been commenced, by the time the directions came to be issued. Heard the learned counsel for the petitioners, the learned Government Pleaders for Finance & Planning, Roads & Buildings, Irrigation & Command Area Development, Social Welfare and Panchayat Raj & Rural Develpment and the learned standing counsel for the other institutional respondents. 1996 Act and Cess Act were enacted with the avowed policy and the object of protecting the interests of workers engaged in the building activity. These enactments apply to the persons or institutions, which engage not less than 10 workers in construction or building work in the preceding twelve months. The manner in which the cess is to be administered is provided for under the Act. The Cess Act enables the competent authority to recover or collect cess at the prescribed rate which shall be between 1% and 2%. It is stated that the notification that was issued in this regard stipulates the cess at 1%. The burden in the form of cess must be borne by the agency that undertakes the construction. It is not an obligation that can be placed upon the contractors. The incidence of this levy cannot be compared with the service charges or profession tax which are squarely referable to the activity undertaken by the person or agency not the one for or on behalf of whom the activity is undertaken. Obviously to ensure proper enforcement of the provisions of the enactments, the state Government issued directions from time to time to the departments concerned to add an amount of 1% to the estimates. In U.O.Note dated 28.02.2008, the finance department tendered the following advice: (i) In respect of ongoing works, wherever agreements do not contain the clause relating to the condition of the Building and other construction Workers Cess Act, an amount of @ 1% of the amount will be added to the estimates and the estimates revised accordingly for all payments made after 26.6.2007. (ii) In respect of agreements which provide that the Contractor shall pay Cess at the rate not exceeding 2% of the cost of Construction under the Building and other Construction Workers Cess Act, 1996, the Contractor has no option but to Pay Cess by way of deduction at source effective from 26.6.2007. Independent of the said note, the departments of the Government are expected to recognize their obligation under 1996 Act. Assuming that there existed any justification for their omission to include the amount payable towards cess in the estimates, they cannot be permitted to deduct that amount while making payments to the contractors. In a way, it would amount to either penalizing the contractor or affecting the levy contrary to the provisions of 1996 Act. The consequences that flow from any violation of 1996 Act must in fact be directed towards agency that has undertaken construction. Therefore, the inescapable conclusion is that the occasion for an agency to deduct the cess under the Cess Act would arise only when the corresponding amount is included in the estimates. Conversely, if the amount representing the cess, is not included in the estimates, deductions cannot be made while making payments to the contractors. Therefore, the writ petitions are disposed of directing that: - (a) the respondents shall include 1% cess in the estimates for the works which they propose to undertake, if the work continues for or beyond twelve months and involves engagement of 10 workers or more; and (b) the respondents shall not deduct any amount towards cess, unless the corresponding amount is included in the estimates. There shall be no order as to costs. ______________________ L. NARASIMHA REDDY, J 22nd October, 2009 Note: Issue CC in one week. (B/o) GHN