It/r, T.S. Sunil Kumar v. South Central Railway

this Court in W.P.No.106aI of 2a11 and batcl-r. No cosr.s. As a sequel, mrscellaneous pctitions, pendhg i1' :rny, srancl closed \ SD/-T ASSISTANT . JAY G SREE TRAR' //TRUE COPY// SECTTON OFFICER To,

1. 2. .) 4 5 6 j:',sli,3fl :['.]8x:ll?:+q.xr!t'ili{'r:illlJ^i$,:"Ti'fi ii'{,1""1*r +l:8:te, 533,. r" r,n ce ntrar s'o-rtn- 6i, nt,Jr nairway, sbnl'n li";-;P.fl,ril:""'"$Tfr The Senior Ulvlslol The State of AP , througn uommissioner of Labour' T Anjaiah Bhavan RTC X Railwav,secunderabad ^ EI:3f iJff sllfr sI,|[sxA'[,ill,'3Y3'-'e$P5"'is'rJ?'-Y"r otnECronete) toPUCl (tr Two CD CoPies (Along with a coov of orurer dated 24.11.2022 in w.p.Nos. 10601 of 201 .l to this order) and batch BM BS I " "1.' \r- HIGH COURT DATED:2510212025 I \ rlt !J ORDER WP.No.10615 of 2011 I I I a6 oR THE Si4 -\:, ,i oJApB zo25 9s \ / DISPOSING OF THE WRIT PETITION WITHOUT COSTS fA frf* \o:i- 1 I{ON'BLE SRI JUSTICE K. LAKSHMAN WRIT PETITION Nos.1060l OF 2011 AND 772t9 & 17235 0F 2022 COMMON ORDER: Heard Mr. A. Nagendra Rao, leamed counsel for the petitioners, Mr. R. Mangulal, learned Standing Counsel for Central Govemment 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.10601 of 2011 is Iiled to; a) to call for the records pertaining to the action of the respondents with regard to lo/o Labour Cess deducting from the bills of the petitioner under the provisions of the Building and other Construction Workers Weltare Cess Act, I 996, Rules made there-under, the Memo No.w. I 48/ l/9,rvol lV dated

03.03.2009 issued by the respondent No.2 and set them aside; b) to direct the respondents not to recover 1% Labour Cess from the bills payabte 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.21lS/09 dated23.03.2009 or anv other works; and c) to award costs by holding the action of the respondents herein as illegal.

3. \\'.P. Nos.L72l9 and 17235 of 2022 are filed seekins the KI, J \\.P Nos :0L6rl !{l,lll .t barch very same relief.

4. Srnce /is involved in the aforesaid three writ petitions is one and the same, they were heard together and decided by way of this common order.

5. In all tl.e aforesaid tbree writ petitions, the petitioners are Conffactors. They have been executing contracts of South Central Railway at rariorr:r places. All the petitioners have particrpated in the Tenders is:rucd bl the South Central Railway and they became successlul L,rdders iu lespect of the subject tenders. Thereafier, Srruth Ccntral Ra 1,,,.,av has allotted thc albresaid sLrbject u,orks tr., the

1.rctiti,.rners, l'hc_r'ha\c also entered into agreements on the specific tenns and corr litrit rs agreed thereon.

6. Responcent No.4 has issued notices to the petitioners to remit building and other construction workers welfare cess @ 1% on the cost of r:onstruction/estimated cost w.e.f. 26.06.2007 onwards as per the Building and Other Construction Workers Welfare Cess Act, 1996 (hereinafter refered as 'Cess Act, 1996' for brevity), and 3 KLJ W.P. Nos.l060l of 20t I & batch decided to recover the amounts from the bills payable to the petitioners .

7. The petitioners have frled 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 thc Schedules or in the Agreements mentioned; ii. There is also no mention about the liability of the petitioners with regard to the paymcnt of the aforcsaid I %o Labour Cess. Without mentioning the same, the respondents cannot claim the said amount from the petitioners; iii. The respondent authorities cannot shift the said liabilify on the petitioners. Therefore, the petitioners are not liable to pay the said amount @ l% of the contract towards labour cess as per theCess Act,1996; iv. The respondents have not even issued any notice seeking explanation demanding the aforesaid amount and, thus, the action of the respondents is unilateral and arbitrary; v. The petitioners are no way related to the building activities as provided under the Act 28 ol 1996 and, therefore, the provisions 4 KL,J w P. r_o..10601 ol2D: I & batch of the saic Cess Act, 1996 are inapplicable to the petitioner for thc purpose of declucting 176 labour cess from the bitls palable to th,,'n r: Vl, Resporrdeut No,4 has no aurhority or jurisdiction to deducr l% laborrr ccs: fiom 26.06,2007 onwards on the cristins bills pata.lrl to the petitioners herein; The respondents without making any assessment of cess, as required rurder the Cess Act, 1996 and the Rules nrade thereun.der and without fixing liability on the petitioners, cannot direct the respondent authorities to deduct l% labour cess fiom the bills ofthe petitioners. The said action of the respondents is arbitrary anrl illegal; The c,omporrent of expenditure upon the labour is only 30% out of tht: tctal rost of the works which should be the basis fcrr the calculalion ,rf l9lc, labour cess. but not on the total cost oi the contraiir as the basis tbr the purpose of calculation and dcclut t i,ru .' I 'l'i, labour cess from the works e xccuted bv the petitirrn:rs. irnd ir. fhe 1t:titiorrcrs have contended that the respondents bave withh:ld tht: aforesaid l% labour cess from the bills and, 5 KL.J u'P Nos 10601 oil0ll & harch therefore, they sought a direction to the respondents to rclease the same with interest @ 24% per annum for the delay in Payment. With the aforesaid submissions, atl the petitioners sought to declare the aforesaid action of the respondents in calculating 1% labour cess from the petitioners' bills as illegal.

8. On the other hand, tearned Standing Counsel for Railways appearing on behalf of respondent Nos.l to 3, on instructions, would submit that it is a Statute and it came into force fuom 26'06'2007 afi' therefore, the petitioners have to pay the said amount' There is no need to mention about 1% 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 pnnciple 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 Court and the Hon'ble Supreme Court' 5 KL.J WP. N.s ll50l oilCl & batch

10. The p,:tirioner in W.p. N0;10601 of 20l l has hled cocy of agreement dated 19.09.2007 entered between him and the respondent Railway. In the said agreement, the nature of work is mentionr:d as under: "SC-KZi-Secrion - SWI - Repairs to ballast retaining walls on ADEN/North Sub Division - SW-II - proposed Raising of ballasr retainers. Repairs to Pitching of banks, steps etc. for bridges (1'otirl 'r(l B ridgcs ). " Cost, date o-' s1,1111191gs11enl, date ol completion and tnainten tnce ctc.. are also sp,:citically mentioned. The value of the u,ork is Rs.26,34.ill I -, Like-rvrse, he has also filed agrecment dated

07.07,2008. whcrein also, the nature of work is mentioned as "constrLrction o/ boundary wall to prevent encroachmertl in ADEN/MDI|". Tte value of the work is Rs.45,54,67gl-. He has also filed another agreement dated 10.12.200g, wherein the nature of work is mentione,J as "repairs to compound wall of staff quarters betn,een WL-GLA in ADEN/S/KZI sub division at W,MABD,NKD." .lhe value of th.e work is mentioned as Rs.23,56,3gg/-. In another agreement, dated 23.03.2009, the nature of work is mentioned as "Repairs to /,"oni verandah for Type-I quarters between WL_GLA '7 KL,J w.P. Nos.l060lol20ll & barch section on ADEN/S/KZI sub division at WL, NA, KDM & MABD'" The value of the work is mentioned as Rs'51,45,208/-' In other two writ petitions, the petitioners have not filed copies of the agreements / work orders. Despite grantlng opportunity by this Court, they have not frled copies of the 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 rcspondent No 4 i'c, the Commissioner of Labour, Government of A.P., had served a notice dated 20 1 1 2007 toremittheBuildingandotherConstructionWorkctsWelfareCess(a' 1% on the cost of construction /estimated cost of constluction from

26.06.200'1 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 future tenders so as to comply with statutory provision of recovering of building cess from theConhactors'bills,indioatingthatcostofmaterialshallbeoutside 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 til.J \l.P No\ 'tt60l ol:{]t I & hdch I 9,1, tiom 26.06)-007 onri,ards. They have decided the cases inro two (02) categt ri:s r c.. (i) agreements entered with the contractors for the tendcrs cail,-'l 1i,: .lLri). 2008: and 1iL) agreements entered rvirh the cortritcrs pritrr r..ru1v,2008 which are in lirrce aiier 26.06.20()i but r.r'ithout spc.cihc c ause of'building cess. In respect of category No.(i), the cess will be re,:overed as per the specific clause incorporated irL the contract agreemerlt. With regard to category No.(ii), they have referred the judgn ent of the combined High Court of Andhra praclesh at Hyderabad in Mis. Cormandel prestcrete private Limitect v. State of .Andhra Pradesh, rep. by principal Secretary to Government, Irrigation and CAD Departmentl, wherein it .,,ras held that cess can tre recovered based on the following points: (a) Welf ln: [3,ra1d *rr constituted by the Ancllua pradcsh Cor errLrnent atrd C.O.Ms,r,,\o.57 was issued on 26.06.2t,)07 directrng a I the Otflcers rrf Central Covernment and Slate Gor ernmcr]t t() l-ecover the building cess, This Coun in thc afores rid judgmenr categorically held that no notice is required to bc i;sued lor recovery of cess from the Contractor,s billsl 20r r (6) ALT 7a-1 9 KL.J W P Nos.l050l of 201 I & b8tch (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 fronr 26.09.1996 ie, datc of notification by Central Govemment; and (c)This Court has cousidered Clause - 69 of the agreements executed by the State Government establishments which provide for compliance with labour regulations' But, in 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 levy of l% cess in the contract agreemetrt 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 rvas taken by the Delhi High Court in its judgment dated 28.02 2007. In view of the same, respondent No'2 directed ail the divisions to work out the cess to be collected from contractorc from the agreements in force on or after 26 06'2007 and 10 KL.J W.P. Nos.1060l of20l: & barch aiso from the agleements in which work is completed but final bills are yet to be draryn as on date and take immediately necessary a Jtion to recover the ar ounts from the contractors, bills and an advise mav be given to tlre contractors regarding the said recovery.

14. ln \4'.P Nos.l72l9 t>f 2022 and, 1i235 of 2022. the pctitionors harc sr-rbrnitted representations, dated 11.01.202 1 antl

22.01 .2021 -espe ctir.cl1, requesting respondent No.3. the Srnior Djr isional [' i:altial N4anager, South Central Railway. Sccunderabad^ rnlbrnring Ihat F'lRs are pendin_u which has been given as suretr.for rocovcry ot bui.lditrg cess. The work has been completed and amounts released er(c3pt ceftain amounts. Thus, they have requested respondent No.3 to release the payments which are specifically mentioned therein.

15. In vierv of the aforesaid submissions, it is relevant to rrote that a leamed,Iudg: of the combined High Court of Andhra pradesh at Hyderabad in M/r;. Cormandel prestcrete private Limitedl, has extensively (lonsrd(:red the scheme ol the aforesaid two Acts i.e.. Cless .Act. 1996 ancl t.rc Building and Other Construction Worklrrs, (llcgLrlation ,,1' Lrr ployment anrl Conditions of Service) Act, I 1,196 t1 Kt ..1 \l, P Nos.]060T ol l0l l & barch ('the Workers'Act'for brevity) as well as its objccts and, ultimately' the following seven (07) issues were framed'

1. Whether before implement[rg the provisions of a statute (Cess Act) and issuance of orders in the impugned Memo, which seeks to implement the provisions of the statute, by way of collection of 1% Iabour cess ftom the bills of the petitioners, the Govemment is under al obligation to issue notice to the petitioners, and whother non-issuance of Prior notice, violated the principles of naturdl justice?

2. whether the Govemment by issuance of orders in a Memo, ts entitled to collect 1 % Iabour cess from the bills of the petitioners w.e.f. 26.06.2007 , i.e, a date tnuch prior to its issuance and atier constitution of the Wellare Boards as providcd trndor thc statute? 3, Whether non-menlioning ol'the levy and collection ol l?'6 labour cess in the agreements/conracts entered into by the petitioners with the respondents, gives the petitioners any Iegitimate expectation that lolo labour cess in terms of lhe Cess Act' would not be collected by the respondents from them?

4. Whether absence of the clause relating to Ievy and collection of 1% Iabour cess in the agreements/contracts, disentitles the respondents ftom deducting the said l% labour cess from the bills of the petitioners, which in fact, is sought to be collected in giving effect to the Ceqs Act?

5. Wtether by allowing the respondents to collect the said 1% labour cess on the basis of the impugled Memo issued by the Govemment, amounts to permitting the respondents to alter the i2 ]1l l \\ | \-.. -r, 1...tt l&brrrh terIS an(l conditions of the agreements/contracts, entcred into bv tlrr: pc,r Loner.s u.ilh the respondenls?

6. \\'herh,:r rhi respondenrs are entitled to collect l% Iabour cess only ufter :bllowing the procedure contemplated under tlle Cess Acr., in tha: after filing of retums by the petitioners, making of assessment by the authority, determination of liability of rhe pet tioners, and after issuance of show cause notice as to collection c f such determined liability?

7. Wh*her the respondents, while collecting 1% labour cess from the bills ot' the petitioners in terms of the Cess Act, should collec: the same only taking into consideration the cost of the conltructi(xr, but not the entire value of the work, and whether the :lement of profit should be excluded while deducting the 1 % labc LLr cessi I 6. On considering the submissions made by both sides, the le amed J uclgu hckl as under: '1hc -espondents do not dispute the fact that in some of thc itr.:reentc ti conlracts entered into by t)rertr u irh rhc pctiti(, ler5 priol ro 26 06.2007, there is no clause incorporatcd l(jr lii\..' uD-1 c0llcction ol l% Lrbour cess iiom the bills prvabie lo lh"-rr.. and thar lerl and collection ol I% labour cess, \\.as not included ir the estimates submitted, However, the absence of such a clause relating to levy and collection of lolo labour cess in the agreemerrts/contracts and non-hclusion of the same in the estimates, by itself do not preclude the respondents from ler.ying and collecting the 1oZ labour cess, which in fact, is sought to be levieri and collected by giving effect to the provisions of a stahrte, whic;t was in force as on the date of the respondents 13 KL,J WP. Nos.1060l of20l1 & batch entering into agreements/conhacts with the petitioners. No doubt, in the agreements/contracts entered into by the respondents with the petitioners prior to 26'06.200'7, the clause relating to levy and collection of cess is absent, but the fact remains, at the time when the petitioners entered into agreemenls/contracts with the respondents, the Workers Act and the Cess Act, which came into force on w e l 01 03.1996 and 03.11,I996 respectively, were very much in force, and in lact, the petltioners in Clauses No.69 ol the agreemenls/ con trac I s 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 1% 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 shorv cause as to why the amount determined should not be collected, is bereft 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 ofthe Rules made thereunder, as also the notification dated 26.09. 1996, issued by the Central Government. Therefore, it has to be held that the respondents while lerying and collecting the labour cess, have to collect thc salnc on lhc cost of the construction incuned by an employer and not the entire value of the work. Accordingly, this question is answered " 14 KL,J W P. Nos.l060l of2Cl i & barch

17. In another judgment of a Division Bench of the High t)ourt of Judicature fo,' the States of Telangana and Andhra pradel;h at Hyderabad in (lovernment of Andhra pradesh v. Lakamsani Samba Si,,a Rao:. had consiclered the definition of Section - 2 (d) of thc Workc-s Act tnd cost o1'construction as delined under Section _ 3 (1) o1'the (l:ss Act. 1996 and held that the expression ,.btrilcling other rclts,rL,ctitttt vork,, is neither a heading of Section, rlor can that be treated as a rrLarginal note. It is an expression which is delined by Section - 2(dl. Therefore, the contention that merely the heading of Section - 2(d) cf the Workers Act uses the word ,building'doei; mean any building, including blast furnace, which is otherwise not included in the definition originally or by issuing notification contemplated undr)r this provision cannot be accepted. The expression "the cost o,r const"uction" as employed in Section - 3 (l) of the Cess Act, 1996 rlc,uld rean the entire cost incurred for construction rf a building, sLrch as crane or blast fuinace, since its construction and erection caltnrlt b( scparated. Though two separate agreements $/ere executed bctrveen the contractors and companies-principal emplc,yer 1i)r c()nstructir)n and sLLpply ol'plant. rnachinery and equipmcnt, u.lLich llll6 rl r Al-l) - lar (t) l l5 KI,1 N P N.! l06rl ollall & hx'.h was a composite conhact for construction/erection of crane with material. Therefore, contract lor supply of plant and machinery cannot be taken into account for directing the contractors to payldeduct 17o cess under the provisions ofCess Act, 1996'

18. In view of the af,oresaid principle laid down in the aforesaid judgments, the contention of the petitioners is that without including the lely of 1% labour cess il the subject contracts, the respondents cannot claim the same is untenable. As discussed above, as per the provisions ofthe Statute, it is the statutory obligation on the part of the 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.l 7219 and I 7235 of 2022, the petitioners have not filed copies ofthe agreements. However, thcy have mentioned the agreemcnt nunlbers as Agreenrcnt Nos.44lCR/2007, 68/5/2008, 98/5/2008 and 2llsl2009 and 78lN/2007, 44/Nl2OOg & 88AI/2009 respectively' However, the petitioner in W.P. No.17235 of 2022 has not mentioned the dates of the said agreements, but it appears they relate to ttre years of 2008 and 16 \l..l \r | \.,. it/,I uttt I & brrch

2009. As .irated rrbo\ e. respondent No.4 hacl issued Notrllcation ilated

26.06.2001 constituting a Board by issuing G.O. Therefore, the petitioners have to pay the aforesaid:cess at the aforesaid rate v/.e,f.

26.06.200'l itself'. The said principle rvas also laid down by a learned Single Judge of ':his Court in ItI/s. ,bormandel prestcrete private Limitedr. No rv rit appeal is filed alainst the said judgment and it i attained firrality. Thus, both the petitioners in W.p. Nos.l7219 and 17235 of 2(122 have ro pay the aforesaid cess at the aforesaid rate,

20. Il so tar as the petitioner in W.p. No.1060l oi 201l is c()nccrne(I. ilLc rriLmc of' the work and the value of the rvork are spccitical)v nrenri.)ned in the contract. In all the agreemcnts cllted

19.09.2007. ()7.t)7 2008. 10.12.2008 and 23,03.2009, the narurt: of work, value ol the works have been specifically mentioned. All the said works Lnr:luclers the definition of "building or other constrlrciion worV' as dehned under Section - 2 (d) of the Workers Act, 1996. lhe petitioner in W.P. No.10601 of 201I is liable to pay cess in term:; of Section - 1 c,f .A.ct l:8 of 1996. i:' :

21. As liscrLssed above, vide ptceedings dated 03.03,2009 i.e. Chief Engineer, \\,orks of South Central Railway has narrated the 17 KI-.J w P. Nos.l060t ol20l1&barch entire facts and also G.O.Ms.No,57, dated 26.06'2007 issued by respondentNo'2constitutingWelfareBoarddirectingalltheofficers of Central Govemment and State Govemment for recovery the building cess. He has also referred the judgments in M/s' Cormandel Prestcrete Private Limitedl and the Delhi High Court in its judgment dared 28.02.2007. He has also categoized all the cases into two' Referring to the same, vide proceedings, dated 03 '03 2009, rcspondent No.2 has instructed all the Divisions of South Ccntral Railwavs ttr work out the cess to be collected from contractors from the agreements in force on or after 26.06 2007 and also from thc agreements in which work is completed but frnal 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/iastnrctions issued by respondent No'2'

22. Yiewed from any angle, the petitioners failed to make out any $ounal to interfere with the aforesaid proceedings and, therefore' the writ petitions fails and the same are liable to be dismissed' 18 KI,,J W.P. Nos.ll50l oi:01 & barch 23 . AII these writ petitions are accordingly dismissed. How'ever. in the :ircumstances of the case, there shall be no order as to costs. As a serlutl, thc miscellanecrus petitions, if any, penrling in the u,nt pctitions shrill stand closed 24th November, 2022 Mg. K. LAKSTINIAN, J