A. Prabhakara Reddy & Co vs State Of M.P. & Ors

The appellants are engaged in the business of construction of buildings etc. In the present matters their grievance is against demand of cess under The Building and Other Construction Workers’ Welfare Cess Act, 1996 (Act 28/96) (hereinafter referred to as ‘the Cess Act’) in the following factual premise. Their agreements or contracts for construction of projects belonging to departments and instrumentalities of Government of Madhya Pradesh were finalized and work orders were issued to contractors (the appellants) between December 2002 to March 2003. Since the Madhya Pradesh Building and Other Construction Workers’ Welfare Board (hereinafter referred to as ‘the Board’) came to be constituted only on 9.4.2003 followed by gazette publication on 10.4.2003, there could be no provision in the contracts as to who shall bear the burden of paying cess under the Cess Act. On that as well as several other grounds the appellants, being aggrieved with the demand of cess made upon them, challenged such demand by preferring writ petitions which have been dismissed by the impugned common judgment dated 21.6.2004 of the Division Bench following an earlier judgment dated 17.3.2004 in LPA no. 169 of 2003.

The Cess Act was published in the gazette on 19.8.1996. Under Section 1(3) it was enforced from still an earlier date, i.e, 3.11.1995. Under this Act, the Central Government framed The Building and Other Construction Workers’ Welfare Cess Rules, 1998 (hereinafter referred to as ‘the Rules’) which came into force on publication in the official gazette dated 26.3.1998. As noted earlier the Madhya Pradesh Government constituted the Board after considerable delay by a notification dated 9.4.2003 published in the official gazette dated 10.4.2003.

13. We also find no merit in other submission advanced on behalf of the appellants that there is legal impediment in charging levy on the cost of construction incurred by the employer from a particular period on account of constitution of Board from a particular date or for any other reason. This argument is fallacious. Such beneficial measures for the welfare of workers are applicable even to the construction activity which may have commenced before coming into force of the BOCW Act and the Cess Act, if they are subsequently covered by the provisions of these Acts. There can be no legal obstacle in ignoring the construction cost incurred before the cess became leviable by distinguishing it from the cost of construction incurred later, from a date when the Board is available to render service to the Building and other construction workers. Levy of cess in these facts and circumstances cannot be faulted for any reason. Demand of cess in the given facts cannot amount to retrospective application of the Cess Act. Hence the appeals must fail.

14. Before parting with the judgment, it is made clear that the appellants did not press their contention that if cess is found leviable, its liability should be borne by the principal, i.e, Government of Madhya Pradesh. They have sought liberty that they be permitted to raise such contention in an appropriate proceeding, in accordance with law. This liberty is granted.

15. The appeals are dismissed but without costs. If any dues of cess payable by the appellants to the respondents has remained unpaid on account of interim orders, all such lawful dues should be paid by the appellants as per law at the earliest and in any case within eight weeks.

August 24, 2015