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Madhya Pradesh High Court · body

2008 DIGILAW 1368 (MP)

KBL-Koya-VA Tech v. State of M. P.

2008-11-24

SANJAY YADAV

body2008
ORDER 1. Challenge in the present writ petition is to an order dated 17.1.2008, whereby 1 % welfare cess has been deducted at source on the approximate value of work done up to 17.1.2008 excluding the measuring-up additions and alteration. Assail is on the ground that under section 3 of the Building and other Construction Workers' Welfare Cess Act, 1996 (hereinafter referred to as Act of 1996) levy and collection of cess is on the cost of construction incurred by an employer and not on the approximate value of work done. It is urged that value and cost being the different percepts, operates in different field. Whereas the cost of construction, it is urged, denotes the actual expenditure, the value connotes the benefit which includes the profit. It is on the basis of these submissions the petitioner questions the validity of the order dated 17.1.2008. 2. The respondents on their part while supporting the action of deducting 1 % welfare cess at source from the running bill of the petitioner states that the same is strictly in accordance with the provisions contained under the Act of 1996 and the Rules made thereunder. It is contended by learned counsel for the respondents that after construing the entire provisions as contained under sections 3, 4 and 5 of the Act of 1996 read with rule 3 of Rules 1998, the action cannot be found fault with. It is accordingly urged that the petition being devoid of substance is liable to be dismissed. 3. Considered the rival submissions put-forth by respective counsel. 4. Before embarking upon the rival contentions, worth it will be to note the relevant provisions of the Act of 1996 which was enacted to provide for the levy and collection of a cess on the cost of construction incurred by employers with a view to augmenting the resources of the Building and other Construction Workers' Welfare Boards constituted under the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996. Section 3 thereof stipulates: "3. Levy and collection of cess. -- (1) There shall be levied and collected a cess for the purposes of the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, at such rate not exceeding two per cent. Section 3 thereof stipulates: "3. Levy and collection of cess. -- (1) There shall be levied and collected a cess for the purposes of the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, at such rate not exceeding two per cent. But not less than one per cent of the cost of construction incurred by an employer, as the Central Government may, by notification in the Official Gazette, from time to time specify. (2) The cess levied under sub-section (1) shall be collected from every employer in such manner and at such time, including deduction at source in 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. (3) The proceeds of the cess collected under sub-section (2) shall be paid by the local authority or the State Government collecting the cess to the Board after deducting the cost of collection of such cess not exceeding one per cent, of the amount collected. (4) Notwithstanding anything contained in sub-section (1) or subsection (2), the cess leviable under this Act including payment of such cess in advance may, subject to final assessment to be made, be collected at a uniform rate or rates as may be prescribed on the basis of the quantum of the building or other construction work involved." Section 4 makes a provision for furnishing of returns in the following terms : "4. Furnishing of returns. -- (1) Every employer shall furnish such return to such officer or authority, in such manner and at such time as may be prescribed. (2) If any person carrying on the building or other construction work, liable to pay the cess under section 3, fails to furnish any return under sub-section (1), the officer or the authority shall give a notice requiring such person to furnish such return before such date as may be specified in the notice." Whereas section 5 empowers on officer or authority to assess the amount of cess payable by employer. The provision stipulates: "5. Assessment of cess. The provision stipulates: "5. Assessment of cess. -- (1) The officer or authority to whom or to which the return has been furnished under section 4 shall, after making or causing to be made such inquiry as he or it thinks fit and after satisfying himself or itself that the particulars stated in the return are correct, by order, assess the amount of cess payable by the employer. (2) If the return has not been furnished to the officer or authority under sub-section (2) of section 4, he or it shall, after making or causing to be made such inquiry as he or it thinks fit, by order, assess the amount of cess payable by the employer. (3) An order of assessment made under sub-section (1) or sub-section (2) shall specify the date within which the cess shall be paid by the employer." Section 14 empowers the Central Government to make Rules for carrying out the provisions of Act of 1996. The Central Government in exercise of the powers conferred by sub-section (1) of section 14 of the Act of 1996 has framed Rules, viz., The Building and other Construction Workers' Welfare Cess Rules, 1998, whereunder, rule 3 stipulates: "3. Levy of cess. -- For the purpose of levy of cess under sub-section (1) of section 3 of the Act, cost of construction shall include all expenditure incurred by an employer in connection with the building or other construction work but shall not include - cost of land; any compensation paid or payable to a worker or his kin under the Workmen's Compensation Act, 1923. Whereas rule 4 lays down the time and manner of collection indicating therein : "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 duration of the project or construction work exceeds one year, cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period. (2) Notwithstanding the provisions of sub-rule (1), where the duration of the project or construction work exceeds one year, cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period. (3) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the levy of cess pertains to building and other construction work of a Government or of a public sector undertaking, such Government or the public sector undertaking shall deduct or cause to be deducted the cess payable at the notified rates from the bills paid for such works. (4) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the approval of a construction work by a local authority is required, every application for such approval shall be accompanied by a crossed demand draft in favour of the Board and payable at the station at which the Board is located for an amount of cess payable at the notified rates on the estimated cost of construction: Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on cost of construction estimated to be incurred during one year from the date of commencement and further payments of cess due shall be made as per the provisions of sub-rule (2). 5. An employer may pay in advance an amount of cess calculated on the basis of the estimated cost of construction along with the notice of commencement of work under section 46 of the Main Act by a crossed demand draft in favour of the Board and payable at the station at which the Board is located: Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on cost of construction estimated to be incurred during one year from the date of such commencement and further payment of cess due shall be made as per the provisions of sub-rule (2). 6. Advance cess paid under sub-rules (3), (4) and (5) shall be adjusted in the final assessment made by the Assessing Officer. Rule 6 obligates an employer to furnish information regarding commencement of work and rule 7 makes a provision for assessment stipulating therein: "7. 6. Advance cess paid under sub-rules (3), (4) and (5) shall be adjusted in the final assessment made by the Assessing Officer. Rule 6 obligates an employer to furnish information regarding commencement of work and rule 7 makes a provision for assessment stipulating therein: "7. Assessment. -- (1) The Assessing Officer, on receipt of information in Form I from an employer shall make a scrutiny of such information furnished and, if he is satisfied about the correctness of the particulars so furnished, he shall make an order of assessment within a period not exceeding six months from the date of receipt of ' such information in Form I, indicating the amount of c~ss payable by , the employer and endorse a copy thereof to the employer, to the Board and to the cess collector and dispatch such order within five days of the date on which such order is made. (2) The order shall inter alia specify the amount of cess due, cess already paid by the employer or deducted at source and the balance amount payable and the date, consistent with the provision of rule 4, by which the cess shall be paid to the cess collector. (3) If on scrutiny of information furnished, the Assessing Officer is of the opinion that employer has under calculated or miscalculated the cost of construction or has calculated less amount of cess payable, he shall issue notice to the employer for assessment of the cess. (4) On receipt of such notice the employer shall furnish to the Assessing Officer a reply together with copies of documentary or other evidence in support of his claim, within fifteen days of the receipt of the notice : Provided that the Assessing Officer may in the course of assessment, afford an opportunity to the assessee to be heard in person, if he so requests to substantiate his claim. (5) If the employer fails to' furnish the reply within the period specified under sub-rule (4), or where an employer fails to furnish information in Form I, the Assessing Officer shall proceed to make the assessment on the basis of available records, and other information incidental thereto. (5) If the employer fails to' furnish the reply within the period specified under sub-rule (4), or where an employer fails to furnish information in Form I, the Assessing Officer shall proceed to make the assessment on the basis of available records, and other information incidental thereto. (6) The Assessing Officer may, at anytime while the work is in progress, authorize such officer to make such enquiry at the work site or from documentary evidence or in any other manner as he may think fit for the purpose of estimating the cost of construction as accurately as possible." 5. Now coming to the contentions raised by learned counsel for the petitioner that it is the cost of construction incurred by an employer which attracts the levy of cess under the Act of 1996 and not the value of such construction. To have a better appreciation of the submissions the distinction between 'cost' and 'value' has to he noted first'. The expression 'cost' as per Black's Law Dictionary, Fifth Edition WEST means -- "expense; price. The sum or equivalent expended, paid or charged for something". ' The cost of construction would thus mean the sum of all the payments to the factors of construction engaged therein to achieve the purpose of construction. Whereas; expression 'value' in the Black's Law Dictionary, Fifth Edition WEST means -- "The utility of an object in satisfying, directly or indirectly, the needs or desires of human beings, called by economists "value in use", or its ,worth consisting in the power of purchasing other objects, called "value in exchange". Joint Highway Dist. No.9 v. Ocean Shore R. Co., 128 Cal. App.; 743,18 p. 2d413, 417. Also the estimated or appraised worth of any object or property, calculated in money. To estimate the worth of; to rate at a certain price; to appraise; or to place a certain estimate of worth on in a scale of values. Hoard v. Wiley, 113 Ga.App.328, 147 SE 2d 782, 784. The value, therefore, depends on the total cost of construction including not only the cost of labour but also the profit. 6. To estimate the worth of; to rate at a certain price; to appraise; or to place a certain estimate of worth on in a scale of values. Hoard v. Wiley, 113 Ga.App.328, 147 SE 2d 782, 784. The value, therefore, depends on the total cost of construction including not only the cost of labour but also the profit. 6. Thus, the expression cost and value are not word of art and, therefore, the rule makers in order to overcome the paradox of cost and value, specifically stipulated in rule 3 of the Rules of 1998 that the cost of construction shall include the expenditure incurred by an employer in connection with the building or other construction work but shall not include cost of lane!; and any compensation paid or payable to an worker or his kin under the Workmen's Compensation Act, 1923. Sub-rule (2) of rule 4 stipulates that notwithstanding the provisions of sub-rule (1), where the duration of the project or construction work exceeds one year, cess shall be paid within thirty days of completion of one year from the date of commencement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period. Sub-rule (5) of rule 4 clearly stipulates that advance payment of cess is calculated on the basis of the estimated cost of construction, to reiterate, at the cost of repetition, it stipulates that: "5. An employer may pay in advance an amount of cess calculated on the basis of the estimated cost of construction along with the notice of commencement of work under section 46 of the main Act by a crossed demand draft in favour of the Board and payable at the station at which the Board is located: Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on cost of construction estimated to be incurred during one year from the date of such commencement and further payment of cess due shall be made as per the provisions of sub-rule (2). Sub-rule (6) permits the adjustment of advance cess paid under sub-rule (3), (4) and (5)of rule 2 in the final statement made by the Assessing Officer. 7. Sub-rule (6) permits the adjustment of advance cess paid under sub-rule (3), (4) and (5)of rule 2 in the final statement made by the Assessing Officer. 7. In the case at hand, it is observed from the impugned order dated 17.1.2008 that amount of advance cess is calculated on the basis of approximate value of work done. The expression "approximate value of work done" draws its meaning from section 3 of the Act of 1996 read with rule 3 of the Rules of 1998. The learned counsel for the petitioner is, therefore, not correct in his submission that, other than the expenditure incurred by the employer in connection with construction work is being eluded in the cost. 8. Having thus considered this Court does not find any substance in e challenge put forth by the petitioner. In the result the petition fails and hereby dismissed.