The High Court · 2025

the affidavit filed in support of the writ petition, the High Court may be pleased to directtherespondentstopaytheamountsunderthebillspayabletothepetitioner underTenderNoticeNo.l6lDEN/EstatesIHYBdl.2.2.2ol2WithoUtdeductingthe labour cess @ '1 % pending disposal of the above Writ Petition' Counsel for the Petitioner : SRI V.SUBRAHMANYAM (NOT PRESENT) Counsel for the Respondents No.1to11: SRI P'BHASKAR Gounsel for the Respondent No.12 : GP FOR LABOUR The Court made the following: ORDER THE H N'BLE SRI IU ICE I.SREENIV AS RAO Writ Petition No.7864 of 2012 Order, No representation on behalf of the petitioner. Leamed counsel appearing on behalf of the respondents, fairly submits that the issue raised in this writ petition is squarely covered by order darcd 2+.11.2022, passed by this C.ourt in W.P.No.1O60l of 20ll and batch. In view of aforesaid submission, this Vrit Petition is disposed of in terms of the order dated 2+.tt.2022, passed by this Court in \(.P.No.10601 of 2011, ardbatch. No costs. As a sequel, miscellaneous petitions, pending if any, stand closed. //TRUE COPY// SD/. L. VIJAYA LAXMI S STANT REGISTRAR SECTION OFFICER To, I 2 3 4 N/ UC] One CC to SRI V.SUBRAHMANYAil/, Advocqle, 6;; cc io sni p.eHnsKAR. Advocate ^[oPUC] i*o bcr to cP FoR HoME, High court to Hyderabad. [OUT] Two CD Copies. (liifi;fiffipy of the Order dated 24'11-2022 in W'P No 10601 or 2011 & batch r '. '- BSK GJP r the State of Telangana at HIGH COURT DATED:2510212025 i ORDER WP.No.7864 of 2012 HE STAI e 1 q C) \?+ 1i JIJN zffi z a , t'.:.:-r..l i.l :r.-,j \:_:_ DISPOSING OF THE WRIT PETITION WITHOUT COSTS x \.' | ( 1l \,, HON'BLE SRI JUSTICE K. LAKSIIMAN WRIT PETITION Nos.1060l OF 20ll AND 17219 & 17235 0F 2022 COMMON ORDER: Heard Mr. A. Nagendra Rao, learned counsel for the petitioners, Mr. R. Mangulal, learned Standing Counsel for Central Government appearing on behalf of respondent Nos.l to 3 and Mrs. Anjali Agarwal, learned Assistant Govemment Pleader appearing on behalf of respondent No.4,

2. W.P.No.l0601 of 201I is filed to; a) to call for the records pertaining to the action of the respondents with regard to lo% Labour Cess deducting from the bills of the petitioner under the provisions of the Building and other Construction Workers Welfare Cess Act, 1996, Rules made there-under, the Memo No.W.l48/1/9/Vo1. IV dated

03.03.2009 issued by the respondent No.2 and set them aside; b) to direct the respondents not to recover lo/o Labour Cess from the bills payable to the petitioner either of the works covered under Tender Notice No.44lCR/07 dated 19.09.2007, No.68/S/08 dated 07.07.2008, No.98/S/08 dated 10.12.2008 and No.2llS/09 dated23.03.2009 or any other works; and c) to award costs by holding the action of the respondents herein as illegal. 2 (1.,., wP Nos 1060, otl0ll &barch

3. W.P. Nos.172l9 utd 11235 of 2022 are filed seeking the very same relief

4. Since ils involved in the aforesaid tkee writ petitions is one and the same, they were heard together and decided by way of this common ordt:r.

5. In all the aforesaid three writ petitions, the petitioners are Contractors. They have been executing contracts of South Central Railway at various places. All the petitioners have participated in the Tenders issued by the South Central Railway and they became successful bidders in respect of the subject tenders. Thereafter. South Central Railway has allotted the aforesaid subject works to the petitioners. They have also entered into agreements on the specific terms and conditions agreed thereon.

6. Respondent No.4 has issued notices to the petitioners to remit building and other construction workers welfare cess @ lYo ol the cost of constructior/estimated cost w.e.t. 26.06.2007 onwards as per the Building and Other Constmction Workers Welfarc Cess Act, 1996 (hereinafter referred as 'Cess Act, 1996' for brevity), and ,, l Kt-,J w.P. Nos.l060l of20l I & bar.h decided to recover the amounts fiom the bitts payable to the petrtloners.

7. The petitioners have filed the aforesaid three writ petitions contending as follows: i. There is no mention of payment of 1% Labour Cess to be paid by the petitioners in the Tender Notifications or in the Schedules or in tbe Agreemenls mentioned; ii. There is also no mention about the liability of the petitioners with regard to the payment of the aforesaid l% Labour Cess. Without mentioning the same, the respondents cannot claim the said amounl lrom the petitionersi iii. The respondent authorities cannot shift the said liability on the petitioners. Therefore, the petitioners are not liable to pay the said amount @ l% of the contract towards labour cess as per the Cess Act, 1996; IV, The respondents have not even issued any notice seeking explanation demanding the aforesaid ,mount and, thus, the action ofthe respondents is unilateral and arbitrary; The petitioners are no way related to the building activities as provided under the Act 28 of 1996 and, therefore, the provisions 'l \ 1 KL.J w.P. tios.l06trr or20l I & barch of the said Cess Act, 1996 are inapplicable to the petitioner for the purpose of deducting l% labour cess lrom the bills payable to them; vl. Respondent No.4 has no authority or jurisdiction to deduct l%o labour cess from 26.06.2007 onwards on the existing bills payable to the petitioners herein: vll. The respondents without making any assessment of cess, as required under the Cess Act, 1996 and the Rules made thereunder and without fixing liability on the petitioners, cannot direct the respondent authorities to deduct lo% labour cess from the bills of the petitioners. The said action ofthe respondents is arbitrary and illegal; vlll. The component of expendihrre upon the labour is oniy 30% out of the total cost of the works which should be the basis for the calculation of 17o labour cess, but not on the total cost of the contract as the basis for the purpose of calculation and deduction of 1olo labour cess from the works executed by the petitioners; and The petitioners have contended that the respondents have withheld the aforesaid 1% labour cess from the bills and, ) KL.J w.P. No11060l of?01I & barch thcrefore, they sought a direction to the respondents to release the same with interest @ 24% per annum for the delay in payment. With the aforesaid submissions, all the petitioners sought to declare the aforesaid action of the respondents in calculating 1oZ labour cess from the petitioners' bills as illegal.

8. On the other hand, learned Standing Counsel for Railways appearing on behalf of respondent Nos. I to 3, on instructions, would submit that it is a Statute and it came into force from 26.06.2007 and, therefore, the petitioners have to pay the said amount. There is no need to mention about lo/o labour cess to be paid in the agreements/notifications. It is a statutory obligation on the part of the petitioners/contractors to comply with the statutory obligation. He has also placed reliance on the principle laid down in catena of decisions to the said effect-

9. Learned Assistant Govemment Pleader for Labour appearing on behalf of respondent No.4 also supported the contentions of the leamed Standing Counsel for Railways and he has placed reliance on the judgments of this Cour-t and the Hon'ble Supreme Court. 6 r,,n *,lliiuu, .r.ot u oo"n '

10. The petitioner in W'P' No 10601 of 201 1 has filed copy ol \ agreement dated 19.09.2007 entered between him and the respondent Railway. In the said agreement, the nature of work is mentioned as under: "SC-KZJ-Section - SWI - Repairs to ballast retaining walls on ADEN/North Sub Division - SW-II - Proposed Raising of ballast retainers. Repairs to Pitching of banks' steps etc' for bridges (Total 90 Bridges)." Cost, date of commencement, date of completion and maintenance etc., are also specifically mentioned' The value of the work is he has also filed agreement dated Rs.26,34,3211-. Like-wise,

07.07.2008, wherein also, "constructictn of boundary wall to prevent encroachment in the nature of work is mentioned as ADEN/MDR". The value of the work is Rs'45'54'678/-' He has also filed another agreement dated 10' 12'2008' wherein the nature of work ismentionedas,,repairstocompoundwallofstaffquartersbetw'een WL-GLA irt ADEN/S/KZI sub division at WL'MABD'NKD'" The value of the work is mentioned as Rs'23'56'388/-' In another agreement, dated 23.03 '2009, the nature of work is mentioned as "Repairs to .front verandah for Type-I quarters between I'I/L-GLA / l KI-,J w.P. Nos.l060l ol20l I & batch section on ADEN/S/KZI sub division at WL, NKD, KDM & MABD." The value of the work is mentioned as Rs.51,45,208A. In other two writ petitions, the petitioners have not filed copies of the agreements / work orders. Despite granting opportunity by this Court, they have not hled copies ofthe said agreements.

11. It is relevant to note that in all the three writ petitions, the Chief Engineer (Works), respondent No.2, had issued proceedings, dated 03-03.2009 stating that respondent No.4 i.e., the Commissioner of Labour, Government of A.P., had served a notice dated 20.11.2007 to remit the Building and other Construction Workers Welfare Cess @ 1% on the cost of construction /estimated cost of construction from

26.06.2007 onwards as per the provisions of the Cess Act, 1996. The Railway Board vide letter dated 09.07.2008 had advised to incorporate necessary clause in the tender documents of all futurc tenders so as to comply with statutory provision of recovering of building cess from the Contractors' bills, indicating that cost of material shall be outside the purview of cess when supplied under a separate schedule item.

12. In view of the above, the Railways have decided for recovery of building and other construction workers welfare cess at \ 8 KL,J W P. Nos.l060l oflol I & batch 1% from 26.06.2007 onwards. They have decided the cases into two (02) categories i.e., (i) agreements entered with the contractors for the tenders called for July,2008; and (ii) agreements entered with the contracts prior to July, 2008 which are in force after 26.06.2007 but without specific clause ofbuilding cess. In respect of category No.(i), the cess will be recovered as per the specific clause incorporated in the contract agreement. With regard to category No.(ii), they have referred the judgment of the combined High Court of Andhra pradesh at Hyderabad in M/s. Cormandel Prestcrete Private Limited v. State of Andhra Pradesh, rep. by Principal Secretary to Government, Irrigation and CAD Departmentr, wherein it was held that cess can be recovered based on the following points: (a) Welfare Board was constituted by the Andhra pradesh Government and G.O.Ms.No.57 was issued on 26.06.2007 directing all the Officers of Central Government and State Govemment to recover the building cess. This Courl in the aforesaid judgment categorically held that no notice is required to be issued for recovery ofcess from the Contractor's billst r0r r (6) ALT 703 9 KI-.J w'P. Nos !0601 or20l | & barch (b) The date i.e., 26.06.2007 was also upheld by the Court stating that the implementation was already delayed which was supposed to be from 26.09.1996 i.e., date of notification by Central Govemmenq and (c) This Court has considered Clause - 69 of the agreements executed by the State Govemment establishments which provide for compliance with labour regulations. But, Railways contract agreements, there is no such direct clause. The clause provided cover Minimum Wages Act, Contract Labour (Regulations and Abolition) Act etc., but the High Court mentioned that mere absence of clause relating to lcvy of l% ccss in the contract agreement does not preclude the department from levying the same. Therefore, the building cess has to be recovered invariably even though the specific clause is not available in the tcnder.

13. A similar view was taken by the Delhi High Court in its judgment daled 28.02.2007. ln view of the same, respondent No.2 directed all the divisions to work out the cess to be collected from contractors from the agreements in force on or after 26.06.200'/ and 10 KLJ w.P. Nos.l060I oil0ll & balch also from the :rgreements in which work is completed but llnal bills are yet to be drawn as on date and take immediately necessay action to recover the :rmounts fiom the contractors' bills and an advise mav be given to the contractors regarding the said recovery.

14. In W.P Nos.l7219 of 2022 and 17235 of 2022, the petitioners have submitted representations, dated 11.01.2021 and

22.01 .2021 respectively requesting respondent No.3, the Senior Divisional Financial Manager, South Central Railway, Secunderabad, inlonning that FDRs are pending which has been given as surety for recovery of burlding cess. The work has been completed and amounts releascd cxccl)t certain amounts. Thus, they have requested rcspondent No.3 to release the payments which are specifically mentioned therein.

15. In view of the aforesaid submissions, it is relevant to note that a learned Judge of the combined High Court ofAndhra Pradesh at Hyderabad in M/s. Cormandel Prestcrete Private Limitedr, has extensively considered the scheme of the aforesaid two Acts i.e., Cess Act, 1996 and the Building and Other Construction Workers' (Regulation ol- Employment and Conditions of Service) Act, 1996 l i ; j l l1 Kf .J w-.P Nos.1(r60l of20t I & bakh ('the Workers' Act, for brevity) as well as its objects and, ultimately, the following seven (07) issues were framed. l. Whether before implementing the provisions of a statute (Cess Act) and issuance oforders in the impugaed Memo, which seeks to implement the provisions of the statute, by way of collection of lo% labour cess fiom the bills of the petitioners, the Govemment is under an obligation to issue notice to the petltioners, and whether non-issuance of prior notice, violated the principles ofnatural justice?

2. Whether the Govemmenl by issuance of orders in a Memo, is entitled to collect lyo labour cess from the bills ofthe petitioners w.e.f. 26-06.2007, i.e. a date much prior to its issuance and after of the Welfare Boards as provided under the constitution statute? 3' whether non-mentioning ofthe levy and collection of loz labour cess in the agreements/contracts entered into by the petitioners with the respondents, gives the petitioners any legitimate expectation that l o/o labour cess in terms of the Cess Act, would not be collected by the respondents from them?

4. Whether absence of the clause relating to levy and colJection of r o/o rabour cess in the agreements/cortracts, disentitres the respondents from deducting the said l% labour cess from the bills ofthe petitioners, which in fact, is sought to be collected in giving effect to the Cess Act?

5. Whether by allowing the respondents to collect the said l% labour cess on the basis of tl cdvemmenr, amounts to #'ff:il::.ffi:"::i::,,tJ [: \ l2 KL,J W P Nos 10601 of20l I & balch terms and conditions of the agreements/contracts, entered into by the petitioners with the respondents?

6. Whether the respondents are entitled to collect lo% labour cess only after following the procedure contemplated under the Cess Act, in that after filing of retums by the petitioners, making of assessmenf by the authority, determination of liability of the petitioners, and after issuance of show cause notice as to collect ion ofsuch determined liability? T.Whether the respondents, while cotlecting 1%o labour cess from the bills of the petitioners in terrns of the Cess Act, should collect the same only taking into consideration the cost of the constnrction, but not the entire value of the work, and whether the element of profit should be excluded while deducting the t % labour cess?

16. ()n considering the submissions made by both sides, the leamed Judgc hcld as under: ' The respondents do not dispute the fact that in some of the agrecments/contracts entered into by them with the petitioners prior to 26.06.2007. there is no clause incorporated for lcvy and collection of I o/o labour cess from the bills payable to thenr, and that [e\y and collection of l7o labour cess, was not included in the estimates submitted. However, the absence of such a clause relating to lery and collection of 1% labour cess in the ag'eements/contracts and non-inclusion of the same in the estimates, by itself do not preclude the respondents fiom lerying and couecting the l7o labour cess, which in fact, is sought to be levied and collected by giving effect to the provisions of a statute. which was in force as on the date of the respondents 13 Kf .J W.P. No1l060l ofloll & barch entering into agreements/contracts with the petitioners. No doubt, in the agreements/contracts entered into by the respondents with the petitioners prior to 26.06.2007, the clause relating to levy and collection of cess is absent, but the fact remains, at the time when the petitioners entered into agreements/contracts with the respondents, the Workers Act and the Cess Act, which came into force on w.e.f.01.03.1996 and 03.11.1996 respectively, were very much in force, and in fact, the petitioners in Clauses No.69 of the agrcements/contracts entered into by them with the respondents, have agreed to comply with all the labour regulations.,, "....In that view of the matter, it has to be held that the contention of the petitioners that the respondents are not entitled to collect 1olo labour cess unless they follow the procedure contemplated under the Cess Act, namely after filing of retums by the petitioners, followed by assessment by the authority, determination of liability of the petitioners, and calling upon them to show cause as to why the amount determined should not be collected, is berefl of any merit.', "....Thus, it is clear that the labour cess sought to be collected is not on the entire value of the work, but only on the cost of construction, which is as provided in Section 3 of the Cess Act and Rule 3 of the Rules made thereunder, as also the notification dated 26.09.1996, issued by the Central Goveroment. Therefore, it has to be held that the respondents while lerying and collectirg the labour cess, have to collect the same on the cost of the construction incurred by an employer and not the entire value ofthe work. Accordingly, this question is answered.,, \ t4 Kl-,J W.P. Nos.l060l of20l I & barci

17. In another judgment ola Division Bench of the High Court of Judicature for the States of Telangana and Andhra Pradesh at Hyderabad jn Government of Andhra Pradesh v. Lakamsani Samba Siva Rao2, had considered the definition of Section - 2 (d) of the Workers Act and cost of construction as defined under Section - 3 (l) of the Cess Act, 1996 and held that the expression "building or other consttaction worV' is neither a heading of Section, nor can that be treated as a marginal note. It is an expression which is defined by Section - 2(d) Therefore, the contention that merely the heading of Section - 2(d) of the Workers Act uses the word 'building' does'not mean any building, including blast furnace, which is otherwise not included in the definition originally or by issuing notification contemplated under this provision cannot be accepted. The expression "the cost of construction " as employed in Section - 3 (1) of the Cess Act, 1996 would mean the entire cost incurred for construction of a building, such as crane or blast furnace, since its construction and erection cannot be separated. Though two separate agreements were executed between the contractors and companies-principal employer for construction and supply of plant, machinery and equipment, which '. zoro lzy elo zro 1oe; l5 KL.J W.P. Nos.1060l ofl0l I &barch was a composlte contract for construction /erection of crane with material. Therefore, contract for supply of plant and machinery cannot be taken into account for directing the contractors to payldeduct 1o% cess under the provisions ofCess Act, 1996.

18. In view ofthe aforesaid principle laid down in the aforesaid judgments, the contention of the petitioners is that without including the lerry ol l% labour cess in the subject contracts, the respondents cannot claim the same is untenable. As discussed above, as per the provisions of the Statute, it is the statutory obligation on the part ofthe contractors to comply with the same. Merely because the clause is not incorporated in the agreements, the petitioners cannot now contend that they are not liable to pay the said cess.

19. As discussed above, in W.P. Nos.172L9 and 17235 of 2022, the petitioners have not filed copies ofthe agreements. However, they have mentioned the agreement numbers as Agreement Nos.44lCR/2007, 681512008, 98/5/2008 and ZUS|2009 and 78n'l/2007, 44li.l/2009 & 884{/2009 respectively. However, the petitioncr in W.P. No.17235 of 2022 has not mentioned the dates of the said agreements, but it appears they relate to the years of2008 and l6 KL,J w P Noq 106,ll ol 20l I & balci

2009. As stated above, respondent No.4 had issued Notification dated

26.06.2007 constinrting a Board by issuing G.O' Therefore, the petitioners have to pay the aforesaid cess at the aforesaid rate w.e.f.

26.06.2007 itselL The said principle was also laid down by a learned Single Judgt: of this Court in M/s. Cormandel Prestcrete Private Limitedr. No writ appeal is filed against the said judgment and it attained finality. Thus, both the petitioners in W.P' Nos.l7219 and 17235 of 2022 have to pay the aforesaid cess at the aforesaid rate.

20. In so far as the petitioner in W.P. No.10601 of 201.1 is concerned, the name of the work and the value of the work are specifrcally mentioned in the contract. In all the agreements dated

19.09.2007, 07.07.2008, 10.12.2008 and 23'03.2009, the nature of work, value of the works have been specifically mentioned- All the said works includes the definition of "building or other construction worlC' as def-rned under Section - 2 (d) of the Workers Act, 1996. The petitioner in W.P. No.l060l of 201 I is liable to pay cess in tenns of Section - 1 of Act 28 of 1996.

21. As discussed above, vide proceedings dated 03.03.2009 i.e. Chief Engineer, Works of South Central Railway has narrated the t7 KI-J w.P. Nos.l060l of20l I & barch entire facts and also G.O.Ms.No.57, dated 26.06.2007 issued by respondent No.2 constituting Welfare Board directing all the Officers of Central Govemment and State Govemment for recovery the building cess. He has also relerred the judgments in M/s, Cormandel Prestcrete Private Limitedr and the Delhi High Court in its judgment dated 28.02.200'l . He has also categorized all the cases into two. Referring to the same, vide proceedings, dated 03.03.2009, respondent No.2 has instructed all the Divisions of South Central Railways to work out the cess to be collected from contractors from the agreements in forcc on or aller 26.06.2007 and also from the agreements in which work is completed but final bills are yet to be drawn as on date and take immediate necessary action to recover the amounts from the contractors' bills. Thus, there is no error in the same. It is a reasoned order/instructions issued by respondent No.2.

22. Viewed from any angle, the petitioners failed to make out I any ground to interfere with the aforesaid proceedings and, therefore, the writ petitions fails and the same are liable to be dismissed. 18 KU W P. Nos.106{}l of20l I & barch

21. All these writ petitions are accordingly dismissed. However, in the circumstances of the case, thcre shall be no order as to costs. As a sequel, the miscellaneous petitions, if any, pending in the writ petitions shall stand closed. 24th November, 2022 Mgr K. LAKSHMAN,J